US Dollar Index sees downside below 104.70 as risk-on impulse firms, yields near 3.30%

• The DXY has displayed a steep fall at open on weaker yields and downbeat Retail Sales.
• A rate hike by 75 bps has brought intense volatility in the DXY.
• The Fed sees an elevation in the Unemployment Rate for bringing price stability.

The US dollar index (DXY) has witnessed a steep fall after a flat open and is expected to extend its losses after slipping below Wednesday’s low at 104.66. The DXY turned extremely volatile after the Federal Reserve (Fed) announced a rate hike by 75 basis points (bps). Although the long-term consensus was 50 bps, a higher US inflation print of 8.6%, reported last week had bolstered the odds of a mega rate hike. A significant slippage in the US Treasury yields brought extreme selling pressure on the asset. The 10-year US Treasury yields slipped 5.50% on Wednesday. At the press time, the benchmark yields are at 3.29%. The Fed has announced a rate hike of 75 bps after almost 28 years.

Powell’s conference after the monetary policy announcement

Fed chair Jerome Powell was seen thankful to the strong and well-positioned economic growth, which has backed the Fed to dictate a mega rate hike. Also, higher employment generation by the US economy on a constant basis has supported the Fed to take a bold decision on the interest rates. An extreme tightening policy by an economy results in lower growth forecasts. The Fed believes that a reduction in inflation rates to near 2% while keeping the jobless rate at 4.1% will be an achievement for the Fed.

Downbeat US Retail Sales data

More focus on the Fed’s interest rate decision trimmed the attention of the US Retail Sales, which also reported on Wednesday. The monthly Retail Sales turned negative, landing at -0.3%, much worse than the expectations and the prior print of 0.2% and 0.7% respectively. While, the Retail Sales Control group released at 0%, lower than the expectations and the former print of 0.5%.

Key events this week: Building permits, Initial Jobless Claims, and Industrial Production.

Major events this week:  Swiss National Bank (SNB) interest rate decision, Bank of England (BOE) interest rate, Bank of Japan (BOJ) rate decision.