- DXY weakens further amid rising job cuts and trade deficit concerns.
- Challenger Job Cuts report shows layoffs surged over 100% in February.
- ECB cuts rates by 25 basis points, revising inflation outlook upward.
- US Jobless Claims and trade balance data highlight economic strains.
The US Dollar Index (DXY) is extending its losing streak on Thursday as fresh labor market and trade data put additional pressure on the Greenback. Job cuts surged dramatically, while weekly jobless claims showed a mixed picture of the labor market.
Meanwhile, the European Central Bank (ECB) delivered a widely anticipated rate cut, with President Christine Lagarde emphasizing the need for heightened vigilance in uncertain economic conditions.
Daily digest market movers: US Dollar down after an additional round of soft labor data, ECB
- The latest Challenger Job Cuts report for February revealed a sharp rise in layoffs, more than doubling compared to January.
- Continuing Jobless Claims climbed to nearly 1.90 million, signaling challenges in the employment market despite Initial Jobless Claims dropping to 221,000.
- The European Central Bank lowered its deposit rate by 25 basis points to 2.50 percent, aligning with market forecasts and keeping policy on a steady path.
- The ECB raised its inflation outlook for 2025, fueling concerns that persistent price pressures could complicate future policy decisions.
- Christine Lagarde emphasized the importance of a data-driven approach, stressing that the ECB must remain flexible in an increasingly volatile economic environment.
- Regarding Fed expectations, the CME FedWatch Tool now shows a growing probability of a Federal Reserve rate cut in June, with expectations surpassing 85 percent.
DXY technical outlook: Bearish trend accelerates
The US Dollar Index (DXY) remains under pressure, breaking below key support levels. The 20-day and 100-day Simple Moving Averages (SMA) are nearing a bearish crossover, reinforcing negative momentum. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to tilt bearish, suggesting further downside risks. If DXY fails to find support near 103.00, the next key level to watch is 102.50, which could mark the continuation of the current selloff.
- DXY drops over 2.5% this week as selling pressure intensifies.
- ADP employment data misses expectations, showing hiring slowdown.
- ISM Services PMI beats forecasts, signaling economic resilience.
- Technical indicators suggest further downside as key support levels break.
The US Dollar Index (DXY), which tracks the Greenback’s performance against six major currencies, is extending its decline for the third consecutive day on Wednesday. The weaker-than-expected labor market data, coupled with rising trade tensions and policy uncertainty, is pushing the US Dollar further down.
While the services sector remains robust, the market is focusing on the ADP employment shortfall, reinforcing expectations of a slowing economy. So far, the DXY has depreciated over 2.5% this week, with no immediate signs of reversal.
Daily digest market movers: US Dollar weakens amid labor concerns
- DXY plunges below key levels, marking the lowest point since November 2024.
- ADP employment report shows the US private sector added only 77K jobs, missing expectations of 140K.
- On the positive side, ISM Services PMI rises to 53.5, exceeding forecasts and showing continued economic expansion.
- That being said, inflationary pressures persist, with the Prices Paid Index climbing to 62.6 from 60.4.
- Employment Index within ISM data improves, rising to 53.9 from 52.3.
- CME FedWatch Tool indicates increased rate cut expectations for later this year and investors may start betting on 100bps of easing in 2025.
DXY technical outlook: Bearish momentum intensifies
The US Dollar Index (DXY) continues to slide, falling below both the 20-day and 100-day Simple Moving Averages (SMA), which are nearing a bearish crossover around 107.00. The completion of this pattern could reinforce further downside pressure, leaving the US Dollar vulnerable to further declines.
The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue pointing lower, confirming bearish momentum. With the index now at levels not seen since November 2024, a sustained break below 106.00 could open the door for a move toward 105.50 and beyond.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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