The U.S. Dollar Index tracks the strength of the dollar against a basket of major currencies. DXY was originally developed by the U.S. Federal Reserve in 1973 to provide an external bilateral trade-weighted average value of the U.S. dollar against global currencies. U.S. Dollar Index goes up when the U.S. dollar gains "strength" (value), compared to other currencies. The following six currencies are used to calculate the index:
Euro (EUR) 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP) 11.9% weight
Canadian dollar (CAD) 9.1% weight
Swedish krona (SEK) 4.2% weight
Swiss franc (CHF) 3.6% weight
The consumer-price index is expected to show inflation pressures remained fairly flat at a 3.3% year-on-year increase.
A flurry of economic reports churned out last week injected much-needed volatility in forex dealmaking.
The Fed convenes later this week and the markets are already pricing in a 25bps rate lift to cool inflation further.
The US dollar has consolidated after the latest economic report suggested the Fed’s work may be coming to an end.
Inflation expectations for June are set for 3.1%, way lower than May’s print. Volatility to be expected.
It’s a packed few days for the greenback and uncertainty can cause some surprise swings as the news gets churned out.
In the green corner – the Fed predicts at least two more rate hikes. In the red corner – traders fed up with the dollar’s dominance.
The US dollar index retreated on the first day of Powell’s testimony as bulls found little to charge up their long bets.
The Federal Reserve’s first rate pause in a year was a reprieve, but it was the projections that threw investors off.
Initial filings for unemployment benefits in the past week raced to 261,000, the highest level since October 2021.
The dollar index advanced 0.7% on Friday, staging a U-turn against major peers on robust US data.
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