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May 04, 2019
The US Dollar Index held at around 97.83, amid anticipation of investors awaiting the release of US NFP data in April. The US dollar moved relatively quiet throughout Asian trade and was at a high level against major currencies because it was supported by the FOMC Statement which dimmed the prospect of a Fed interest rate cut at the end of the year.
The next movement of the US Dollar will be very dependent on the April 2019 NFP data which will be released later tonight. The solid performance of the US Dollar over the past two sessions was able to cut losses suffered since the beginning of the week.
On Monday, the DXY Index opened at 98.02, then fell to around 97.15 at the start of the New York session on Wednesday, before finally skyrocketing after the Hawkish Jerome Powell Statement early yesterday. At present, the DXY index is at 97.83, still near the Open level on Friday.
According to NAB analysts, there is a possibility that the release of April Non-Farm Payroll data will be stronger than expected, given the adverse weather conditions which weighed on the growth of employment in March that was over so it would encourage the recruitment of new workers. They predict the NFP will rise to 260k in April.
Even though the true NFP grew higher than expected, the US Dollar step in continuing the bullish trend could be restrained if the data on the hourly wage rate (Average Hourly Earnings) were disappointing. Please note, the March wage increase was only 0.1 percent (MoM), lower than the drop forecast to 0.2 percent, and worse than February's level of 0.4 percent.
If the release of the NFP and the wage rate of US workers in April show a positive trend, this would likely further erode the market's view of the prospect of the Fed Rate Cut in December. At present, the probability of cutting interest rates is around 49 percent, down from 61 percent reached on Wednesday.
Powell's statement at the latest press conference showed the Fed was not worried about decreasing the inflation rate, because it was only triggered by temporary factors. The US dollar jumped quite significantly against other major currencies following the statement of the Fed Chair, Jerome Powell, who said that the central bank's attitude was right now.
The statement was able to dim the prospect of cutting interest rates this year, which over the past few days has continued to weigh on the movement of the US Dollar. The strengthening of the US Dollar is reflected in the movement of the DXY Index which measures the strength of the USD against six other major currencies.
After holding a two-day meeting, the FOMC on Thursday announced earlier this morning that it would keep its benchmark interest rate at around 2.5 percent. Another thing that became a market mover was Jerome Powell's statement that the market was considered to be hawkish and sounded quite optimistic."
We think the current policy is right and we don't see any compelling reason to shift policy in either direction (either Rate Hike or Rate Cut)," Powell said. In addition, Powell also said that the recent weakening of US inflation was caused by temporary factors, so Powell did not imply his concern about the prospect of inflation this year.
Powell's statement seemed to ignore President Trump's insistence that the Fed would cut interest rates as soon as possible amid low inflation rates. "The US dollar turned higher after Powell confirmed that the factors that suppressed the inflation rate were only temporary.
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