- The US Dollar halts decline and sees the DXY US Dollar Index trade around 0.50% lower.
- China says tariffs need to go first, before talks can start.
- The US Dollar Index remains capped below the 100.00 round level.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades lower, roughly 0.50% at the start of the US trading session on Thursday. The knee-jerk reaction comes after comments from United States (US) President Donald Trump and US Treasury Secretary Scott Bessent. Both individually said that no unilateral offer was made to China from the US to lower tariffs, while Trump said that reciprocal tariffs could be revisited if negotiations are not going the way the Trump administration wants them to go, Bloomberg reports.
On the economic calendar front, Durable Goods is painting a very split picture. The headline Durable Goods number is a whopping 10.4% surge against the previous 0.8% where a 2.0% was expected for March. Though, the caveat comes with the core Durable Goods where cars and transportations are left out, which sinks to 0%, a standstill, against the previous 0.7% and expected 0.2%..
Daily digest market movers: Durable Goods reveals split actions
- The Financial Times reports that China has called on the US to “completely cancel all unilateral tariff measures” if it wants trade talks on Thursday just hours before the US opening bell. Previous remarks and statements from the Trump administration on a possible trade deal with China are being labeled as ‘fake news’ by Beijing.
- The Chicago Fed National Activity Index for March fell into contraction by -0.03, coming from 0.18. that same number got revised up to 0.24 for February.
- The US Durable Goods for March and the Jobless Claims already came out as well:
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- Headline Durable Goods came in at a whopping 10.4%, beating the expected 2% and far up from 1% previously which got revised down to 0.9%. The Orders without Cars and Transportation fell to 0.0%, missing the 0.2% and far less than the 0.7% advance seen a month earlier.
- Weekly Initial Jobless Claims came in higher at 222,000, beating the estimate of 221,000 and up from 215,000 previously. Continuing Claims fell to 1.841 million, beating the 1.88 million estimate.
- Around 14:00 GMT, Existing Home Sales data for March will be published. Sales are expected to soften to 4.13 million against 4.26 million in February.
- Near 15:00 GMT, the Kansas Fed Manufacturing Activity Index for April is expected. No forecast available with the previous number at 1.
- Equities are turning flat on the day, with very minor gains and losses on the quote board across Europe and the US.
- The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in May’s meeting stands at 6.1% against a 93.9% probability of no change. The June meeting still has around a 58.7% chance of a rate cut.
- The US 10-year yields trade around 4.32% looking for direction as markets are facing some knee jerk reactions on the Trump comments.
US Dollar Index Technical Analysis: Sure the numbers, but underneath…
The US Dollar Index (DXY) is backing off again after a two-day recovery. It looks like the DXY will start to consolidate, trading in a tight range between 100.00 and 98.00. Traders are likely to be fed up with these constant knee-jerk reactions and could opt to look for other places to put their money, with Gold as the preferred sweet spot.
On the upside, the DXY’s first resistance comes in at 99.58, acting up again as a false break occurred Wednesday and Thursday. Should the US Dollar be able to turn positive again, look for 100.22 with a break back above the 100.00 round level as a bullish signal of their return. A firm recovery would be a return to 101.90.
On the other hand, the 97.73 support is very close and could snap at any moment. Further below, a rather thin technical support comes in at 96.94, before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
