DXY faces profit-taking risks ahead of the long weekend
Profit-taking on DXY possible ahead of the long weekend.
Group Research - Econs, Philip Wee24 May 2024
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The DXY Index recovered by 0.6% to 105 in the first four days of this week, reducing this month’s loss to 1.1%. The US Treasury 10Y yield rose for the first time in four weeks by 5.7 bps to 4.48% from worries at the US Federal Reserve that monetary policy was taking longer to lower inflation to target. S&P 500 plunged after opening at a new lifetime high, closing Thursday lower by 0.7%. This week’s weakest DXY components were the CAD (-0.9%) and the JPY (-0.8%) due to lower-than-expected CPI readings in Canada and Japan. CHF and EUR depreciated less by 0.6% and 0.5%, respectively, from doubts about more rate cuts beyond June at the European Central Bank and the Swiss National Bank. Although GBP barely changed from last Friday’s 1.27 level, its tone has softened after UK CPI inflation fell to 2.3% YoY in April from 3.2% in March. GBP could slip below 1.27 on political uncertainties after Prime Minister Rishi Sunak’s surprise call for a snap election on July 4.

DXY faces resistance at 105.10 and profit-taking risks ahead of the long weekend holiday; US markets will be closed for US Memorial Day on Monday, May 27. Next week’s softer US data could temper this week’s worries regarding delayed Fed cuts. On May 28, delayed Fed cut expectations could see the US Conference Board’s consumer confidence index extend its decline below 100 in May after dropping to 97 in April. On May 30, the US Bureau of Economic Analysis will likely lower the annualized GDP growth for 1Q24 from its advance estimate of 1.6% QoQ saar. On May 31, the May PCE deflators should mirror the slower monthly CPI readings.

Quote of the day
“I believe success is achieved by ordinary people with extraordinary determination.”
     Zig Ziglar

24 May in history
Amy Johnson became the first woman to fly solo from the UK to Australia in 1930.


Philip Wee

Senior FX Strategist - G3 & Asia
[email protected]


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