- The US Dollar Index remains under pressure on Thursday, seen around the 101 area after earlier attempts to rebound faded.
- Fresh tariff hikes and dovish-leaning Fed commentary added to recession and inflation worries, weighing on the Greenback.
- Technical indicators remain broadly bearish, with strong resistance seen near 102.30 and no clear support below the current zone.
The US Dollar Index (DXY) trades near the 101 area in Thursday’s session, falling further after failing to hold recovery momentum from earlier in the week. The move comes as new tariff measures confirmed by the White House send the effective rate on Chinese imports to a staggering 145%. Federal Reserve (Fed) officials, including Presidents Jeff Schmid and Lorie Logan, warned that these trade actions risk worsening inflation and labor market dynamics.
On the technical side, the MACD continues to signal selling pressure, while the Relative Strength Index hovers just above oversold territory. With downside momentum intensifying, the DXY remains vulnerable.
Daily digest market movers: US Dollar slips as Fed flags inflation risks
- The White House confirmed the escalation of tariffs on Chinese goods, lifting the effective rate to 145% while maintaining a 10% baseline for others.
- Fed officials issued strong warnings, highlighting how the surprise tariff surge could drive consumer prices higher and complicate monetary policy decisions.
- Dallas Fed’s Logan said unexpected trade measures could trigger job losses and stoke inflation, forcing the central bank into a defensive posture.
- The latest jobless claims rose slightly to 223K, while continuing claims dropped to 1.85M, offering mixed signals on the labor front.
- Despite recent volatility, Fed policymakers avoided direct mention of March CPI in their latest comments, though markets remain sensitive to inflation prints.
Technical analysis
The US Dollar Index paints a bearish picture as it continues to slide near the lower edge of its daily range around the 101 area. The Moving Average Convergence Divergence (MACD) confirms downward momentum with a sell signal, and the Relative Strength Index (RSI) sits around 29, indicating weak price strength but not yet in deep oversold territory. While the Awesome Oscillator is neutral, Momentum (10) indicates further downside pressure. The bearish tone is reinforced by several downward-sloping moving averages: the 20-day SMA at 103.52, 100-day SMA at 106.48, and 200-day SMA at 104.79. An additional downside could materialize if the index breaks below current levels, while resistance is seen at 102.29, 102.72, and 102.89.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
