USD Index climbs to daily highs near 101.60 as risk-off prevails

• The index gathers extra pace and revisits the 101.60 zone.
• The resurgence of the risk aversion underpins the US Dollar.
• Next on tap in the docket comes the CB’s Consumer Confidence.

The demand for the Greenback intensifies on the back of persistent risk aversion and lifts the USD Index (DXY) to daily highs in the 101.60/70 band on Tuesday.

USD Index stronger on risk-off mood

Banking jitters resurface and favours the re-emergence of the risk-off sentiment, which in turn morphs into extra upside pressure for the Buck.

The move higher in the index comes so far in tandem with further weakness in US yields across the curve, as the fly-to-safety feeling props up the demand for bonds on Tuesday.

Meanwhile, investors seem convinced of another 25 bps rate hike by the Federal Reserve at its meeting on May 3 amidst hawkish Fedspeak and with inflation still way above the Fed’s 2.0% target. At the same time, a source of potential weakness for the Dollar comes from rising speculation of an impasse in the Fed’s hiking cycle soon after the May event.

In the US data space, the the FHFA’s House Price Index expanded 0.5% MoM in February, while the Consumer Confidence tracked by the Conference Board and New Home Sales are due later in the NA session.

What to look for around USD

The dollar faces renewed upside pressure on the back of the re-emergence of the risk aversion mood on Tuesday.

Looking at the broader picture, the index continues to navigate in a consolidative phase against steady expectations of another rate increase in May by the Fed.

In favour of a pivot in the Fed’s hiking cycle following the May event appears the persevering disinflation and nascent weakness in some key fundamentals.

Key events in the US this week: House Price Index, CB Consumer Confidence, New Home Sales (Tuesday) – MBA Mortgage Applications, Durable Goods Orders, Advanced Goods Trade Balance (Wednesday) – Flash Q1 GDP Growth Rate, Initial Jobless Claims, Pending Home Sales (Thursday) – PCE/Core PCE, Employment Cost, Personal Income, Personal Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.36% at 101.68 and faces the next hurdle at 102.80 (weekly high April 10) followed by 103.05 (monthly high April 3) and then 103.23 (55-day SMA). On the flip side, the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022).