The US dollar index jumps with high inflation and proves that the federal reserve has the right policy in force
- The US dollar is fixed organic pollutants after the most powerful numbers of inflation in January.
- Federal Reserve Chairman Jerome Powell is heading to his second day in Capitol Hill.
- The US dollar index (DXY) is launched higher and heads to 108.50 in the wake of the consumer price index.
The US dollar index (DXY), which tracks the performance of the US dollar (USD) against six main currencies, rises in light of the release of the consumer price index in January (CPI), which came as an optimistic surprise for both the monthly core and the address number. During his first degree in Capitol Hill facing law makers, the Federal Reserve Chairman (FERED) did not leave Jerome Powell many clues about the timing of reducing interest rates by the central bank, if any. Traders are studying what to do next, as we slowly returned, but they certainly started heading up this week.
The economic calendar of the President of the Federal Reserve, Jerome Powell, who will deliver a speech for the second consecutive day in Capitol Hill. In addition, many loudspeakers are set in the Federal Reserve to speak. The head of Atlanta in the Federal Reserve, Rafael Bustic and the Federal Reserve Governor, will also present comments.
Daily Digest Market Movers: Powell on the right to money
- The US consumer price index has been released for January:
- The monthly CPI scale came to 0.5 %, over the estimate of 0.3 % and comes from 0.4 % in the previous month.
- The monthly basic inflation scale jumped to 0.4 %, higher than 0.3 % expectations and compared to 0.2 % in December.
- The strongest inflation numbers feed higher prices in the United States, and in turn, lead to the establishment of the strongest USD (USD)
- At 15:00 GMT, Federal Reserve Chairman Jerome Powell will start his second day of his testimony in Capitol Hill.
- At 17:00 GMT, the Federal Reserve in Atlanta Rafael WWT. provides statements at the Atlanta branch of the National Association of Companies Manager.
- At 22:05 GMT, Federal Reserve Governor Christopher Waller is scheduled to speak at a “very stable conference: the incoming infrastructure of the real world applications” in San Francisco, California.
- The arrows dive into the back of the American CPI version. As the returns rise, the stocks take a step back and dive by 1 % on average.
- CME Fedwatch Tool provides a 95.5 % opportunity for the Federal Reserve to maintain interest rates unchanged in its next meeting on March 19.
- The return in the United States increases for 10 years to 4.63 %, and it is greater for the third day in a row and recovery more than a new annual level of 4.40 % last week.
Technical analysis of the US dollar index: Here the logic goes
The US dollar index (DXY) is stuck in the Cluedo game, and the Chairman of the Powell FED does not give much any evidence. With traders leaving ignorant about what or when the Federal Reserve will slowly, but steadily, bonds, the bonds return to the traders as a safe place to be in periods of uncertainty. However, the US dollar should only see some tick and tick.
On the upward trend, the first barrier was exceeded in 109.30 (July 14, 2022, the high) for a short period, but it did not retain last week. Once this level is recovered, the next level that must be hit before progressing at 110.79 (September 7, 2022, high) remains.
On the negative side, 107.35 (3 October 2023, Al -Raif) remains strong support after several tests last week. In the event of more negative side, search for 106.52 (April 16, 2024, high), 106.21 (simple moving average 100 days), or even 105.89 (resistance in June 2024) as better support levels.
US dollar index: daily chart
Common questions among central banks
Central banks have a major mandate is to ensure that there is a price stability in a country or region. Economics are constantly facing inflation or contraction when the prices of some goods and services fluctuate. High prices for the same goods mean inflation, and the continuous reduction of the same goods means shrinkage. The central bank’s mission is to maintain demand for queue by adjusting the policy price. For the largest central banks such as the American Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation approximately 2 %.
The central bank has one important tool at its disposal to obtain inflation higher or less, and this is by changing the standard policy price, known as the interest rate. In the previous moments, the Central Bank will issue a statement of its policy price and provide an additional reason about the reason that remains or changes (cutting or walking). Local banks will adjust their savings rates and their lending rates accordingly, which in turn will make it difficult or easier for people to gain their savings or companies to obtain loans and provide investments in their business. When the central bank raises interest rates significantly, this cash tightening is called. When you cut its standard price, it is called cash reduction.
The central bank is often political independent. Members of the Central Bank Policy Council pass through a series of paintings and sessions before being appointed to the Policy Council seat. Every member of this council is often a specific condemnation of how to control the central bank for inflation and subsequent monetary policy. Members who want a very loose monetary policy, with low cheap lending rates, are called to increase the economy significantly while they are satisfied with a slightly higher vision of inflation than 2 %, “doves”. Members who want to see higher rates to reward savings and the desire to keep lighting on inflation at all times “hawks” will not be rest until inflation is at 2 % or less than 2 %.
Usually, there is a president or president who leads each meeting, who needs to create a consensus between hawks or doves and has the last saying when this is divided into a vote to avoid a 50-50 tie about whether the current must be modified. The president will often deliver speeches that can be followed directly, as the current monetary position and expectations are connected. The central bank will try to push its monetary policy forward without operating violent fluctuations in prices or shares or currency. All members of the central bank will direct their position towards the markets before the policy meeting occurred. A few days before a policy meeting was held until the new policy is connected, members are prevented from speaking publicly. This is called the obstruction period.
