The US Dollar (USD) makes a meagre attempt to recover and returns to the low-105.00s when measured by the US Dollar Index (DXY) towards the week’s conclusion. Prior to Friday’s opening bell on the old continent, the index had four straight days of daily pullbacks. Now, it is trading a little higher than the 105.00 benchmarks.
The improvement in the dollar’s attitude coincides with some profit-taking behaviour in the risk complex and a slight decrease in fed rates throughout the curve, which gives away some of Thursday’s rise.
The US dollar is still moving in a direction that favours riskier assets, especially after July’s lower-than-anticipated US inflation data eliminated support for a prospective 75 basis point rate rise at the Federal Reserve meeting last month.
Regarding the latter, San Francisco Fed M. Daly (2024 voter, hawk) stated late on Thursday that the baseline scenario is a rate increase of 50 basis points in September. The likelihood of a half-point rise in the Fed Funds Target Range in September is greater than 62%, according to CME Group’s FedWatch Tool.
Later in the NA session, the advanced Consumer Sentiment, as measured by the U-Mich Index, will be the key development in the US data arena. Despite the recent recovery in the risk-associated world and growing confidence that the Fed will raise interest rates by 50 bps next month, the index is still under pressure around the 105.00 range.
In the meanwhile, as investors revise their expectations for the Federal Reserve’s next move, the US dollar may see some further turbulence. Considering the macro environment, the US Dollar looks to be supported by the Fed’s divergence from most of its G10 rivals, notably the ECB, as well as periodic resurgences of risk aversion and geopolitical effervescence.
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