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On January 30, Elias Haddad, global head of market strategy at Brown Brothers Harriman, pointed out that if Warshs vision for Federal Reserve policy is implemented, the US yield curve may steepen further due to lower short-term interest rates, while long-term interest rates may remain stable or even rise due to insufficient credibility of US fiscal policy.On January 30th, Mark Dowding, Chief Investment Officer of BlueBay Asset Management, stated that the market widely expects Kevin Warsh to provide justification for a dovish stance, arguing that productivity gains from artificial intelligence will ensure inflation remains under control. Therefore, the futures market continues to anticipate two Fed rate cuts this year, consistent with expectations over the past few months. Compared to other potential candidates, Warsh is likely to be considered one of the less dovish ones. Previous interactions with other Fed members have shown that Warsh is highly respected, and his appointment as Fed Chairman is unlikely to pose a threat to the institutions independence.David Bahnsen, Chief Investment Officer of Barnson Group: Kevin Warsh enjoys respect and credibility in the financial markets, and anyone who gets the job (Chairman of the Federal Reserve) will inevitably lower interest rates in the short term. But I believe he will be a reliable candidate in the long run.Iranian Foreign Minister Araqchi: If necessary, we will strengthen cooperation with Türkiye.On January 30th, Trump announced his intention to nominate Kevin Warsh as the next Federal Reserve Chairman. Warsh served as a Fed governor from 2006 to 2011 and advised Trump on economic policy. He will succeed current Chairman Powell after his term ends in May, marking his return to the Fed. In 2017, Trump skipped Warsh and chose Powell instead. Warsh publicly advocated for interest rate cuts last year, aligning with Trumps stance and contrasting with his long-standing "hawkish" image. During his tenure at the Fed, Warsh consistently maintained a high level of vigilance regarding inflation and often supported higher interest rates. Trump previously stated that willingness to cut interest rates is considered a "litmus test" for the next chairman, raising market concerns about the potential damage to the Feds independence. Warshs Senate confirmation process may be further complicated by the Justice Departments recent announcement of an investigation into the Fed, with some Republican senators indicating they will block any Fed nomination until legal issues are resolved.

The US Dollar Index (DXY) clings to 98.000 despite a gloomy mood and a need for safe havens

Larissa Barlow

Apr 01, 2022 10:11

  • The US Dollar Index closed March with a 1.65% rise, boosted by a bearish market attitude.

  • A protracted confrontation between Russia and Ukraine could benefit safe-haven assets.

  • Money market futures have priced in a 69.9 percent possibility of the Fed raising interest rates by 50 basis points at its May meeting.

  • DXY Price Prediction: The bias is upward, but a breach below 97.802 might allow for additional losses.

 

The US Dollar Index, usually known as DXY, is a measure of the value of the US dollar versus a basket of six currencies. It closed March positively, with a monthly gain of 1.65 percent, its best since November of 2021. At the time of writing, the US Dollar Index was at 98.348.

 

On the last trading day of March, the market was in a bad mood. Failure to reach a significant settlement in the Russia-Ukraine crisis leaves investors on edge, enhancing the dollar's prospects. Furthermore, money market futures forecast the Federal Reserve to raise interest rates by 50 basis points at its May and June meetings, keeping the US dollar on the rise.

 

The US Personal Consumption Expenditure (PCE), the Federal Reserve's preferred gauge of inflation, increased by 6.4 percent year on year in February, exceeding the previous 6 percent reading. Meanwhile, Core PCE, which excludes volatile items, increased by 5.4 percent year on year, exceeding the 5.5 percent predicted by analysts.

 

Simultaneously, the US Department of Labor released Initial Jobless Claims for the week ending March 26. The final result was 202K, which was more than the 197K predicted.

DXY Price Prediction: Technical Outlook

The US Dollar Index remains bullish, but is consolidating in the 97.800-99.418 zone. The 50-day and 200-day moving averages (DMAs) remain below the price with an upward slope, indicating that the uptrend is still in place.

 

On the upside, the DXY's first resistance level is 99.000. If the latter is breached, the YTD high of 99.418 will be revealed, followed by the crucial 100.00 barrier.

 

The DXY first support, on the other hand, would be 98.000. A definitive breach would reveal 97.802, which, if broken, would clear the road to 96.000, but it would encounter some obstacles on the way down. The 50-DMA at 97.196 would be the next level of support, followed by 96.000.


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