The U.S. dollar index remains volatile ahead of U.S. CPI data

On the Asian session on Wednesday, the US dollar index hovered around 103.50, and the pound/dollar continued its recent bullish trend on Tuesday, putting aside the trade war concerns that put pressure on the center of the US market.

Analysis of major currencies

United States dollar: As of press time, the US dollar index hovered around 103.49, up 0.06% during the day. On Wednesday, U.S. Consumer Price Index (CPI) inflation data for February became the focus. The market has hit hopes of a rapid rate cut in 2025 after unexpected inflation at the consumer level rose in January, with the market generally expecting lower figures in February. The U.S. Producer Price Index (PPI) inflation report is expected to be released on Thursday. The US dollar index (DXY) fell further, breaking below the key 103.50 level, the lowest level since October 2024. The 20-day and 100-day simple moving averages (SMA) continued to experience bearish crosses, strengthening negative momentum. Both the Relative Strength Index (RSI) and the Moving Average Convergence/Diversity (MACD) show an oversold state, suggesting a possible short-term rebound. However, if the 103.30 support level fails to hold, the next downward target will be close to 103.00.

Euro: As of press time, the euro/dollar hovered around 1.0907, down 0.11% during the day. This week, U.S. data remains the focus of forex traders. This week, EU economic data was significantly sparse; however, important U.S. data releases were scheduled to be held one after another for most of the week. US JOLTThe S job opening data is slightly stronger than expected, providing some stability for the turbulent market. Technically, the euro/dollar closed flat or rose in the past six consecutive trading days except for one day, up 5.5% during the period. The euro rebounded nearly 7.6% from its recent major low of 1.0175, with the bulls easily breaking the 200-day index moving average (EMA). The EUR/USD is now facing technical resistance, near 1.0900, a technology area that confuses euro bulls in October and November last year.

GBP: As of press time, GBP/USD hovered around 1.2936, down 0.11% during the day. The pound/dollar continued its recent bullish move on Tuesday, putting aside trade war concerns that put pressure on the center of the U.S. market. Technically, the GBP/USD is testing the gains in the second week, close to the 18-week high of 1.2950. The main price mark of 1.3000 may limit further bullish gains, as this key mark was used as an important level of integration in October and November 2024. Currently, the kinetic energy is fully in the hands of the buyer, but the technical vibrator has been in the overbought area since January, and a rapid reversal may happen soon.

Summary of news from the Forex Market

1. Bank of Japan observers: Still believe that the Bank of Japan will gradually raise interest rates

The latest survey by the agency shows that Bank of Japan observers still expect the pace of interest rate hikes will be gradual, although they believe that interest rates will rise to higher levels in the current cycle. The survey shows that all 52 analysts expect no policy changes at the March 19 meeting. July is still the best choice for the next rate hike, with 48% of respondents expecting a rate hike in July, down from 56% of the last survey. 76% of respondents expect the Bank of Japan to stick to the pace of hikes about every six months, with the next rate hike between June and September. Meanwhile, respondents who are expected to raise interest rates earlier are still in minority, but there is a slight increase, with 13% expecting the next rate hike to be on May 1, up from 4% in the last survey.

2. US media: Trump's team tends to recommend Bowman as vice chairman of the Federal Reserve's supervision

The Wall Street Journal quoted sources as saying that the advisory team of US President Trump tends to recommend Fed Director Bowman, who also serves as vice chairman in charge of banking supervision. Barr resigns as deputy director of the Federal Reserve in charge of banking supervision after Trump takes office in JanuaryOnly the post of director is retained. Trump has not nominated for succession, and the relevant positions have been hanging. Some Republican lawmakers have always recommended Republican Bowman to the post, and Trump advisers also support the concept. Trump said in an interview on Sunday that the relevant nominees will be announced in the short term.

3. Former U.S. Treasury Secretary Summers: The probability of the U.S. economy falling into recession this year is nearly 50%.

Former U.S. Treasury Secretary Summers said that the possibility of the U.S. economy falling into recession this year is almost 50%. "We have a real uncertainty problem that is difficult to solve," Summers said in an interview. "It is almost certain that the economic growth rate will be lower than expected, and the possibility of a recession is close to 50%. Summers said that major immigration restrictions, federal layoffs and the damage to US avatradescn.competitiveness by President Trump's tariff policies have led to earth-shaking changes in the U.S. economic outlook.

4. The number of job vacancies in the United States has increased, and layoffs have decreased. The labor market seems to be flexible.

The vacancies in the United States increased in January, while layoffs have decreased and the turnover rate has increased, which shows that the labor market has shown flexibility after the Trump administration came to power. Data released showed that the number of job openings increased from 7.51 million revised in December to 7.74 million. The increase in job openings is driven by financial activities, retail trade and construction industries. The increase in the number of resignations is widespread. Despite the downward trend in the past three years, job openings are still above pre-pandemic averages, suggesting employers are still hiring. Details of the job opening and labor flow survey showed that the hiring rate remained unchanged in January, while the layoff rate fell to 1%, the lowest level since June, suggesting that the U.S. economy is still in a limited recruitment, limited dismissal.

Institutional View

1. Analysts: The trade war will force the Bank of Canada to further cut interest rates

The trade war between the United States and Canada prompted economists to predict that the Bank of Canada will lower its policy interest rate to 2% this year, almost as low as before the epidemic. According to an agency's median survey of 12 economists, the Bank of Canada will adjust interest rates from its current 3% by October. Previously, they expected the central bank to end the rate cut cycle at 2.25%, the terminal level currently expected by overnight swap traders. The latest forecasts from economists include central bank officials to cut interest rates by another 25 basis points at their next meeting on Wednesday. All economists surveyed said Trump's trade policy had a significant impact on their interest rate forecasts for 2025 and 2026, affecting accuracy or increasing risks. Economists agree that the looming threat is affecting Canadian business investment decisions.

2. Institutions: UK-Germany's fiscal outlook splits and pound-Europe exchange rate falls under pressure.

MonexEurope analysts said in a report thatThe decline in pound against the euro partially reflects the expected boost in Germany's fiscal spending, but also reflects the UK government's plan to cut welfare spending (suppression sentiment). They said calls for growing welfare cuts ahead of the UK’s announcement of its budget on March 26 could further hit market sentiment, at least in the short term. If that's true, it means pound is not doing well this month. However, reforms to the welfare system may prove to be "a long-term positive impact on the pound once the initial negative news starts to fade".

3. Mitsubishi UF: The uncertainty of US policy has questioned the safe-haven role of the US dollar.

Mitsubishi UF analyst Lee Hardman said in a report that the intensified policy uncertainty under the Trump administration has sparked doubts about the safe-haven role of the US dollar. Trump's remarks about the economy having a transition period and his plan to implement further tariffs put pressure on risk appetite, he said. "If risk aversion continues to intensify, whether the US dollar will further weaken with the decline of US yields and the US stock market (this is a relationship that has been around since the beginning of this year), or whether the US dollar will start to gain more support from the rebound in risk aversion demand, it remains to be seen."

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