Possible Cautious Policy Approach On Interest Rates Keeps Dollar Lower

The dollar index is little changed while pressured by the change in the view of the interest rate hike’s projection due to the current banking concerns, supporting equities and commodities and awaiting the FOMC data set for tomorrow.

The Fed is expected to deliver a moderate 25 bps rate hike, rather than the prior 50 bps expected hike and the forecast pointing to rate cuts around June with a 48% probability.

The banking crisis which collapsed the Silicon Valley Bank and New York Signature Bank in the fast span of about 2 weeks as the First Republic Bank received support from large US Banks. Credit Suisse has been taken over by UBS as the Swiss government prompted to do so, according to several reports.

The US central bank Fed provides global dollar liquidity with daily currency swaps to the Canadian, English, Japanese, European and Swiss central banks as the hidden debt might be a factor of concern, according to a past report from the BIS.

Looking at the technical side of the dollar index, we can see the core selling around the upper-value extreme of the Decade’s current developing value area, targeting a potential rotation towards the VWAP or Quarter’s lower value extreme, depending on the further monetary path conclusions.

The hourly interval seemingly with a downside imbalance might find some adding around the developing VWAP while the auction depends on the mentioned path of the monetary policy, specifically the upcoming projection from the FED and the economic data which could change the curve more dovish.

A lower dollar could support commodities such as Gold or Copper. The Japanese yen might be an asset to rise against the dollar and Bitcoin could be a silent winner for the moment, depending on the perception of investors towards the FOMC data.  

There is still a slight probability that the Fed will surprise investors by keeping the pace to fight inflation off the cards or to halt the hikes to let markets soar. Crucial to fight inflation would be to keep the dollar strong which valued by the stand of the interest rate.

More By This Author:

Bitcoin Around The Winners Of Banking Situation For Now
Interest Rate Projection Turns Dovish While FOMC Awaited: US Stock Markets
Banking Situation Deepens The Drop In Equities While Gold Benefits

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