Forex News

USD Index Rises on Anticipation of Fed’s May Meeting

Published by
Nonhlanhla P Dube
  • The US Dollar Index (DXY) started the week with decent gains, approaching the key 102.00 region on Monday.
  • Investors are anticipating a 25 basis point rate hike at the Federal Reserve’s meeting on May 3, but the likelihood of a pause in the tightening cycle following this meeting seems to be gaining momentum as well.
  • The absence of strong catalysts leaves the price action around the dollar and the rest of the FX space somewhat muted near the 102.00 region, with the DXY in a consolidative phase against steady expectations of another rate increase in May by the Fed.

The US Dollar Index (DXY) began the week with decent gains, as it approached the key 102.00 region on Monday. The DXY is a measure of the value of the US dollar against a basket of major currencies, including the euro, yen, and pound. This uptick in the DXY comes as the US economy continues to show signs of strength, with investors anticipating a 25 basis point rate hike at the Federal Reserve’s meeting on May 3.

Investors are keeping a close eye on the Fed’s monetary policy decisions, as the likelihood of a pause in the tightening cycle following the May meeting seems to be gaining momentum. This is due to the ongoing disinflation and weakness in some key fundamentals, which may prompt a pivot in the Fed’s hiking cycle.

Despite the lack of strong catalysts, the DXY is currently in a consolidative phase, as it fluctuates alongside alternating risk appetite trends. In the absence of strong catalysts, the price action around the dollar and the rest of the FX space remains muted near the 102.00 region.

In South Africa, investors and traders should keep an eye on the potential impact of the USD Index on the ZAR exchange rate, as the two currencies are often inversely correlated. A stronger US dollar could lead to a weaker ZAR, which could have implications for South Africa’s import and export markets.

Looking ahead, there are several key events in the US this week that could impact the DXY, including the Chicago Fed National Activity Index, House Price Index, and New Home Sales. Additionally, geopolitical tensions with Russia and China, as well as the ongoing US-China trade conflict, could also impact the DXY in the coming weeks.

As of now, the DXY is gaining 0.17% at 101.89 and faces its next hurdle at 102.80, followed by 103.05 and 103.27. On the flip side, the breach of 100.78 would open the door to 100.00 and finally 99.81.

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube

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