US Dollar Index slips below 104.40 on soaring market mood, Fed Powell testimony eyed

• The DXY is declining towards 103.80 on positive market sentiment.
• Fed Powell's testimony will dictate the rationale behind the announcement of a 75 bps rate hike.
• Lower expectations from US PMI numbers have signaled recession worries.

The US dollar index (DXY) has witnessed a steep fall in the initial ticks and is expected to extend its losses after slipping below Monday’s low at 104.23. The DXY displayed subdued performance on Monday amid an improvement in the risk appetite of the market participants. A rebound in the risk-on impulse has diminished the safe haven’s appeal.

Fed Powell testimony

Investors in the FX domain are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell, which is due on Wednesday. Fed Powell is going to dictate the rationale behind announcing the 75 basis points (bps) rate hike. Apart from that, the market participants will get a true picture of the economy and the status of inflation and employment. The important thing of the discussion is going to be the dictation over the rate hike in July, which is seen at 75 bps as stated by Fed Governor Christopher Waller.

Estimates for US PMI trims

Considering the significant increase in interest rates and prohibition of helicopter money into the US economy by the Fed, the market participants have slashed the growth rates, retail sales, and other economic activities. As per the market consensus, the Services PMI is seen extremely lower at 49.1 against the prior print of 53.2. While the Manufacturing PMI is expected to slip to 54.7 from the former figure of 55.7.

Key data this week: Existing Home Sales, Initial Jobless Claims, S&P Global PMI, Bank Stress Test Info, Michigan Consumer Sentiment Index (CSI), and New Home Sales.

Major events this week:  People’s Bank of China (PBOC) interest rate decision, Reserve Bank of Australia (RBA) minutes, Bank of Japan (BOJ) minutes, European Union (EU) Leaders summit.