- The US dollar is positive this week, staying in the range where it is in front of most of the main peers.
- China has denied comments while commercial conversations are ongoing between China and the USA.
- The US dollar index remains limited below the round level of 100.00.
The American dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, listed up, rising around 0.40% on Friday at the time of writing. However, the operators are divided, after the US and China issued contradictory comments on whether negotiations for a commercial agreement are being carried out. The president of the USA, Donald Trump, said Thursday that the US is talking to China, which promoted shares of shares and favored the return of the dollar.
In addition, citing familiar sources with the matter, Bloomberg reported Friday that China is considering suspending its 125% tariff on some US imports, including medical equipment, ethane and lease of airplanes. However, China’s Ministry of Foreign Affairs clarified that “China and the US are not having tariff negotiations or negotiations.” When asked about tariff exemptions in some American products, the spokesman for the Ministry of Foreign Affairs said: “I am not familiar with the details, I refer to the competent authorities.”
In The economic calendarthere is a very light calendar ahead. The Federal Reserve (FED) has entered its period of silence before its next meeting of the Federal Open Market Committee (FOMC) on May 7. Meanwhile, this Friday, operators can observe the final reading of April of the consumer’s feeling numbers and inflation expectations of the University of Michigan.
What moves the market today: China denies
- Before the US negotiation session, US President Trump confirmed that the US and China are in conversations, even confirming Reuters that Chinese President Xi Jinping has been in telephone contact with the US president. Trump did not reveal who commercial conversations are being held with. Meanwhile, the rumor was confirmed by the US Treasury Secretary, Scott Besent. Details about the content or when an agreement is expected to be vague.
- China, meanwhile, continues to deny the conversations and demand that these unfounded rumors end. In addition, China first asks to see all the tariffs lifted before conversations can be considered.
- The University of Michigan has published its final reading for April.
-
- The consumer’s feeling index was 52.2, from 50.8 in preliminary reading.
- 5 -year consumer inflation expectations are maintained at 4.4%.
- The actions begin to doubt Trump’s comment, since there is no reason why China would deny the news in this firm way. European actions are slightly upward, while US futures become negative.
- The CME Fedwatch tool shows that the probability of an interest rate cut by the Federal Reserve at the May meeting is 6.1% compared to a 95.3% probability that there are no changes. The June meeting still has about 61.4% probability of a rate cut.
- The yields of 10 years of the US are traded around 4.28%, looking for direction while the markets face some immediate reactions to Trump’s comments.
Technical analysis of the US dollar index: end of the month ahead
The American dollar index (DXY) might seem up and be ready to jump higher once holders arise on a possible commercial agreement between China and the US, since rumors are increasing towards that possibility. However, a great downward risk comes with a possible peace agreement between Russia and Ukraine, which would boost the euro (EUR) and weigh on the DXY. Therefore, there are many moving parts that could overcome the upward potential or the loss for the Dollar.
Upwards, the first resistance of the DXY is located at 99.58, where a false break occurred on Wednesday and Thursday. If the US dollar extends its recovery, look for 100.22, which supported the DXY in September 2024, with a break above the round level of 100.00 as a bull sign of its return. A firm recovery would be a return to 101.90.
On the other hand, the support at 97.73 could be quickly tested before any substantial bearish holder. Below, a relatively thin technical support is located at 96.94, before looking at the lowest levels of this new price range. These would be 95.25 and 94.56, which would mean new minimums not seen since 2022.
US dollar index: daily graphics
FAQS Central Banks
Central banks have a key mandate that consists in guaranteeing the stability of prices in a country or region. Economies constantly face inflation or deflation when the prices of certain goods and services fluctuate. A constant rise in the prices of the same goods means inflation, a constant decrease in the prices of the same goods means deflation. It is the Central Bank’s task to keep the demand online by adjusting its interest rate. For larger central banks, such as the US Federal Reserve (FED), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation about 2%.
A central bank has an important tool to raise or lower inflation: modify its reference interest rate. In precommunicated moments, the Central Bank will issue a statement with its reference interest rate and give additional reasons of why it maintains or modifies it (cut it or the SUBE). Local banks will adjust their savings and loan rates accordingly, which in turn will make it difficult or facilitate that citizens obtain profits from their savings or that companies ask for loans and invest in their businesses. When the Central Bank substantially rises interest rates, there is talk of monetary hardening. When it reduces its reference rate, it is called monetary relaxation.
A central bank is usually politically independent. The members of the Central Bank Policy Council go through a series of panels and hearings before being appointed for a position in the Policy Council. Each member of that council usually has a certain conviction on how the Central Bank should control inflation and the consequent monetary policy. Members who want a very flexible monetary policy, with low types and cheap loans, to substantially boost the economy, while comprising with inflation slightly greater than 2%, are called “pigeons.” Members who prefer higher types to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is located at 2% or just below.
Normally, there is a president who directs each meeting, has to create a consensus between the hawks or the pigeons and has the last word when the votes must be divided to avoid a draw to 50 on whether the current policy must be adjusted. The president will pronounce speeches, which can often be followed live, in which he will communicate the current monetary position and perspectives. A central bank will try to boost its monetary policy without causing violent oscillations of the fees, the actions or their currency. All members of the Central Bank will channel their position towards the markets before a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, the members are prohibited from speaking publicly. It is what is called a period of silence.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
