US Dollar Index regains 99.00 and trades in 3-week highs
- DXY clinches new tops beyond the 99.00 barrier.
- US yields extend the uptrend to fresh cycle highs.
- Goods Trade Balance, Dallas Fed Index, Biden’s speech next on tap.
The greenback pushes higher and advances to new multi-week tops past the 99.00 mark when tracked by the US Dollar Index (DXY) at the beginning of the week.
US Dollar Index now targets the 2022 high near 99.40
The index advances for the fourth consecutive session on Monday and manages to reclaim the area beyond the 99.00 yardstick on the back of the persistent selloff in the risk complex and helped by the unabated move higher in US yields.
Indeed, the intense selloff in the US debt market shows yields in the short end of the curve advance to levels last seen in April 2019 above the 2.40% level, while the belly of the curve tests the 2.55% area for the first time since April 2019.
The relentless advance in US yields has been exacerbated in past weeks after the Federal Reserve hinted at the likeliness that it could tighten its monetary conditions further in the next months. This view was also reinforced by Chief Powell last week along with other Fed’s rate-setters.
In the docket, Advanced Goods Trade Balance figures for the month of February are due seconded by the Dallas Fed Manufacturing Index, while President Biden is expected to speak on the 2023 Budget.
What to look for around USD
The upside momentum in the index gathers extra pace and finally leaves behind the 99.00 barrier on Monday. Concerns surrounding the geopolitical landscape are expected to keep propping up the demand for the buck in combination with prospects of extra tightening by the Fed. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should underpin inflows into the safe havens and lend legs to the dollar at a time when its constructive outlook remains well supported by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy.
Key events in the US this week: Advanced Goods Trade Balance (Monday) – FHFA House Price Index, CB Consumer Confidence (Tuesday) – Mortgage Applications, ADP Employment Change, Final Q4 GDP (Wednesday) – PCE Price Index, Initial Jobless Claims, Personal Income, Personal Spending (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI (Friday) .
Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is up 0.43% at 99.23 and a break above 99.41 (2022 high March 7) would open the door to 100.00 (psychological level) and finally 100.55 (monthly high May 14 2020). On the flip side, the next down barrier emerges at 98.40 (low March 25) seconded by 97.72 (weekly low March 17) and then 97.71 (weekly low March10).