US Dollar Index Hovers Around Monthly Lows

 US Dollar Index Hovers Around Monthly Lows

US Dollar Index Hovers Around Monthly Lows.

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The US Dollar Index (DXY) has dropped to 3-week lows of around 93.61 at the time of writing (10.10 am). This bearish trend has been partly fuelled by a risk-on sentiment and a downward trend in US yields. There is housing data coming in this week that could impact on the dollar. This includes Building Permits data being released later today and Existing Homes Sales data due on Friday. Could there be signs of an overheated housing market beginning to slow down?

Meanwhile, Joe Biden’s multi-billion dollar ‘build back better’ infrastructure plan continues to stall. Nancy Pelosi has been working hard to get the bill pushed through, but Republicans continue to hold it up with fierce opposition to the numbers being spent and some of the programs on the bill. Even if it does eventually pass, will it be recognisable to the original bill? The progress of the bill is likely to impact on the dollar.

Perhaps one of the biggest factors on US dollar price action will be the indicators coming from the Fed. The year has been full of speculation on tapering vs economic recovery. It appears now that rising inflation has forced their hand with signs that tapering could come in November or December this year. This may already be priced in, and other central banks such as the Bank of England could be set to outpace Fed tightening which would add downward price pressure on the DXY.

U.S industrial output declined in September by 1.3% which was the biggest drop since the start of the pandemic as chip shortages and the impact of Hurricane Ida weighed in. An increase in risk sentiment could push the US dollar index down further. Risk perception will stay in the minds of investors.

On Tuesday 19th October:

  • EUR/USD was trading at its highest levels since September at levels above 1.1600
  • GBP/USD was moving higher above 1.379
  • Both AUD/USD and NZD/USD were the day’s top gainers so far and reached multi-week highs
  • USD/JPY continued to trade in a range around 113.95.

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