The US dollar index maintains a position of about 99.50 before the initial unemployed claims
- The US dollar index remained strong as retail sales increased by 1.4 % in March, indicating a strong consumer spending.
- Greenback faces constant pressure as the invested uncertainty is continuing in the unclear direction of American commercial and economic policies.
- Tensions intensified as President Trump began a new investigation into the potential definitions of critical minerals.
The US dollar index (DXY), which tracks the US dollar (USD) for a basket of six main currencies, is slightly stronger, hovering about 99.50, supported by strong consumer spending data. The United States’ retail sales increased by 1.4 % in March, surpassing both the 0.2 % increase in the previous month and the market expectations of 1.3 %, according to the data issued on Wednesday. Market participants are now turning their attention to the upcoming American economic indicators, including construction permits, housing beginnings, the Philly Fed manufacturing index, and demands of the unemployed weekly work.
However, the expectations of the broader US dollar are still under pressure amid continuous uncertainty resulting from unexpected American commercial and economic policies. Tensions intensified after President Donald Trump’s decision to launch a new investigation into the potential tariff for the main metals. The investigation, which targets industries such as copper, medicines, wood, and semi -conductors, highlights concerns about local production capacity limited to the United States in the strategic sectors, and increasing the escalation of commercial rift with China.
Federal Reserve Chairman Jerome Powell addressed economic expectations during a speech at the Chicago Economics Club, noting that the American economy is still “strong” despite increased uncertainty and negative risks. Powell repeated that the Federal Reserve is in a good position to wait for more clarity before adjusting its position on the policy, noting the proposal of employment close to the maximum and inflation slightly higher than the goal of 2 %, although it has managed significantly.
Meanwhile, a recent survey conducted by the New York Reserve Bank in New York has suggested an increase in consumer pessimism, as it expects more high inflation families, the prospects for weaker jobs, and the most stressful credit conditions in the coming months. Financial markets are now pricing in a possible resumption of price discounts that start in June, with expectations that the policy rate is currently by 4.25 % to 4.50 %-it can be reduced by a full percentage point depending on the end of the year.
Questions and answers in US dollars
The USD (USD) is the official currency of the United States of America, and a “reality” currency for a large number of other countries where there is a circulating alongside local notes. It is the most trading currency in the world, as it represents more than 88 % of the rotation of global foreign currencies, or on average $ 6.6 trillion in transactions per day, according to data from 2022. In the aftermath of World War II, the United States took over the British pound the world reserves. For most of its history, the US dollar was backed by gold, even the Bretton Woods agreement in 1971 when the golden standard went.
The most important individual factor that affects the value of the US dollar is the monetary policy, which is formed by the Federal Reserve (Fed). The Federal Reserve has two states: to achieve price stability (control of control) and enhance full employment. Its primary performance to achieve these two goals is to adjust interest rates. When prices rise very quickly and inflation is 2 % higher than the Federal Reserve goal, the Federal Reserve will raise rates, which helps the value of the dollar. When inflation decreases to less than 2 % or the unemployment rate is very high, the Federal Reserve may reduce interest rates, which weighs to green.
In maximum situations, the Federal Reserve can also print more dollars and quantitative mitigation (QE). QE is the process that the Federal Reserve increases significantly from the flow of credit in a suspended financial system. It is a measure of the non -standard policy used when the credit is dry because banks will not lend to each other (for fear of failing to pay the opposite end). It is the last resort when it is unlikely to achieve interest rates simply the necessary result. The Federal Reserve is the preferred to combat the credit crisis that occurred during the great financial crisis in 2008. It includes the printing of the Federal Reserve more dollars and their use to buy US government bonds mostly from financial institutions. QE usually leads to the weakest US dollar.
The quantitative tightening (QT) is the opposite process in which the Federal Reserve stops buying bonds from financial institutions and does not invest the manager from the bonds he holds in new purchases. It is usually positive for the US dollar.
