The US dollar is gaining attention again as Treasury yields increase
On Thursday, the US Dollar demonstrated a robust increase, further continuing its recent series of successes. In the preceding fortnight, the DXY Dollar Index has exhibited an escalation of approximately 2.2%, marking its most outstanding performance in ten days since September 2022. It is prudent to examine the last 24 hours more closely and anticipate what may occur by the end of the week.
It is not unexpected that the 2-year Treasury yield has experienced a significant increase of more than 8.5% in the last two weeks, which represents the most notable performance within this timeframe since September 2022. This upsurge in short-term bond yields can be interpreted as an indication of growing optimism regarding the US economy.
On Thursday’s trading day on Wall Street, news emerged that members of Congress in Capitol Hill are devising strategies to promptly vote on a collaborative agreement aimed at increasing the debt ceiling, thereby providing a way to prevent a potential default.
In the academic context, it can be observed that timely data regarding the labor market indicates positive developments. Notably, there was an unexpected decrease in initial jobless claims to 242k in the previous week, whereas economists were anticipating an increase of 251k. It is noteworthy, however, that these figures are still lower than the prior reading of 264k.
The persistent tightness of the labor market and underlying inflation has led to financial markets adjusting their expectations of near-term rate cuts by the Federal Reserve. This has resulted in nearly two projected rate cuts being removed from the one-year outlook since last Wednesday.
The probable reason for the surge of the US Dollar can be attributed to the upcoming speech by Chair Jerome Powell and former Chair Bernanke. This policy panel has garnered significant attention and is expected to influence the market trends. If Powell expresses a more cautious stance on near-term Fed rate cuts, it could bolster the USD’s current rally.
US Dollar Technical Analysis
The DXY has surpassed the 100-day Simple Moving Average (SMA) on the daily chart, indicating potential for upward movement towards the March high of 105.88 pending confirmation. This development may allow for further advancement in the short term. The range below of 100.82 – 101.79 is a critical support level to observe.