US Dollar Index Slides Below 104.00; Seems Vulnerable To Weaken Further
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- USD kicks off the new week on a weaker note and snaps a three-day winning streak.
- Bets that the Fed will resume its rate-cutting cycle soon seem to weigh on the buck.
- A positive risk tone also undermines the safe-haven USD and contributes to the slide.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on a three-day-old recovery from a multi-month low and attracts fresh sellers at the start of a new week. The index remains depressed through the first half of the European session and is currently placed below the 104.00 mark, down around 0.20% for the day.
The Federal Reserve's (Fed) less dovish outlook maintained its forecast to deliver two 25 basis points rate cuts by the end of this year and gave a bump higher to its inflation projection. Investors, however, have been speculating that the US central bank will resume its rate-cutting cycle sooner than expected amid worries about a tariff-driven slowdown in US economic activity. This, in turn, is seen undermining the Greenback.
Meanwhile, Reports over the weekend indicated that US President Donald Trump is planning a narrower, more targeted agenda for the so-called reciprocal tariffs set to take effect on April 2. This boosts investors' appetite for riskier assets and turns out to be another factor denting demand for the safe-haven buck. That said, a goodish pickup in the US Treasury bond yields could help limit any meaningful downside for the USD.
Traders now look forward to the release of the flash US PMIs, which, along with speeches by influential FOMC members, might provide some impetus to the Greenback. The focus, however, will remain glued to the US Personal Consumption Expenditure (PCE) Price Index on Friday, which could offer fresh cues about the Fed's rate-cut path and determine the next leg of a directional move for the Greenback.
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