Yields fall from multi-day high amid mixed headlines from Ukraine and Russia, as well as fears from China.
Mixed US data and pullback in inflation predictions add interest to today’s FOMC.
A 0.25% rate-hike has been proposed, but economic projections and Powell’s speech will be key.
The US Dollar Index (DXY), which tracks a pullback of Treasury yields, extends the previous day’s negative performance to 98.90. This is down 0.08% intraday at the Fed Day.
Mixed concerns about the Kyiv/Moscow talks were not only a result of impressive US data but also market fear ahead today’s Federal Open Market Committee’s (FOMC) meeting to impact the greenback gauge on Tuesday. Notable is the fact that China’s covid woes contributed to the risk-off catalysts, which limited the DXY’s losses.
The Ukraine-Russian crisis was a catalyst for hope that there would be peace between Moscow, Kyiv. Russian President Vladimir Putin stated that Kyiv was not serious about finding a mutually agreeable solution, and he poured cold water on optimists.
MykhailoPodoliyak, one the representatives of Ukraine in Russian-Ukrainian talks, stated that there was room for compromise. It is worth noting that Russia was subject to more sanctions by the UK, while Japan wants Moscow to be removed from its favored trade status. Moscow also banned Canadian PMs from entering the country, and imposed sanctions on Joe Biden, the US president. Recent reports from Reuters quote Interfax Ukraine News as saying that “Ukrainian President Volodymyr Zilenskyy stated Wednesday that the positions of Russia and Ukraine in peace talks sounding more realistic.”
The US Producer Price Index (PPI), which was expected to grow 10% YoY, matched the expectations of the YoY. However, the NY Empire State Manufacturing Index showed the largest decline since May 2020.
It is worth noting that China’s record-breaking covid numbers and lockdowns across multiple cities renewed early pandemic woes. However, they couldn’t weight on Wall Street because T-bond yields failed at the multi-day high.
The US 10-year Treasury yields ended Tuesday unaffected despite rising to mid 2019 levels during the initial session, but down one basis point (bp), to 2.149% at last. The five-year bond coupon is also at its lowest level since May 2019, the day before. S&P 500 Futures also suffers moderate losses, despite Wall Street’s positive performance.
DXY traders will continue to pay close attention to the Fed’s verdict, even though the Fed is about to hike the rate by 0.25%. This could be due to uncertainty over future economic growth or inflation scenarios caused by the latest geopolitical fear. Fed Chairman Jerome Powell now has a difficult task: pleasing bulls.
The Fed updates and Ukraine-Russia news, China COVID-19 news, and the US Retail sales for February will guide the US Dollar Index (DXY). These numbers are expected to decrease to 0.4% from 3.8% before.
Analyse technique
Even though a 1-week-old resistance line is challenging US Dollar Index bulls at 99.25, DXY optimists are protected by the 10-DMA at 98.70. Even if the price drops below the 10-DMA, a downward sloping trendline from February 21 near 98.35 adds to the downside filters. Bullish MACD signals, and a firmer RSI suggest more upside for the greenback gauge.
