- The U.S. dollar bounces off support on Friday after a volatile week, trading sideways.
- Fed Chair Jerome Powell reassures markets and reporters about his future leadership.
- The U.S. dollar index approaches 104.50, with next week’s direction remaining uncertain.
The U.S. Dollar (USD) is inching upward as Friday’s U.S. trading session approaches, with investors absorbing the Federal Reserve’s recent decision to cut the policy rate by 25 basis points to a range of 4.50%-4.75%. The rate cut news quickly faded, as questions instead focused on whether Fed Chair Jerome Powell’s role might be affected when President-elect Donald Trump assumes office in January. Powell firmly stated that he would not resign and emphasized the Fed’s independence from U.S. political influences.
On the U.S. economic calendar, the University of Michigan’s preliminary report for November, releasing Friday, will provide insights into consumer sentiment. Analysts expect the report’s inflation expectations to be especially influential, as inflation concerns are expected to be a significant focus for the Trump administration.
Market Movers: Supported Until Trump’s Inauguration?
- On Thursday, the Fed reduced the policy rate by 25 basis points, following a similar move by the Bank of England (BoE) toward a 4.75% rate.
- In his post-meeting remarks, Powell addressed questions about his tenure under President-elect Trump, underscoring the Fed’s data-driven and non-political mandate, reportedly responding bluntly to questions of resignation with a firm “No,” according to Reuters.
- The University of Michigan will release its November Consumer Sentiment report at 15:00 GMT, with expectations for an increase to 71 from October’s 70.5. Inflation expectations, previously at 3%, lack a consensus forecast.
- At 16:00 GMT, Fed Governor Michelle Bowman will speak on banking at a University of Mississippi symposium.
- European stocks are down nearly 1% intraday, with U.S. futures looking similarly weak ahead of the opening bell.
- The CME FedWatch Tool currently shows a 71.3% probability of another 25-basis-point rate cut at the Fed’s December 18 meeting, with a 28.7% chance of no change.
- The 10-year U.S. Treasury yield is trading at 4.31%, down from this week’s high of 4.47%.
US Dollar Index Technical Outlook: Powell Reassures, Stability Expected
The Dollar Index (DXY) eased on Thursday following an earlier surge after Powell’s confirmation of his leadership, which reassured markets about stability in U.S. monetary policy.
The DXY could face resistance at 105.53 (April 11 high) and 105.89 (May 2 high). Breaking these would bring 106.52, a key level from April, into play, leading toward the psychological 107.00 mark.
On the downside, support may lie around the 104.00 level and the 200-day Simple Moving Average (SMA) at 103.86, which could prevent further declines.
