US Dollar Index refreshes monthly low at 109.60 as market mood soars, US GDP buzz

• The DXY has printed a fresh monthly high below 109.56 amid a positive risk impulse.
• An absence of a risk aversion theme has pushed 10-year US Treasury yields lower to 4%.
• The release of the US GDP and Durable Goods Orders data will keep the DXY on the tenterhooks.

The US dollar index (DXY) has recorded a fresh monthly high at 109.56 in Tokyo session as the risk appetite of the market participants is improving significantly. The DXY has shifted into a negative trajectory after surrendering the critical support of 110.00 and is expected to deliver more weakness ahead.

The risk profile remained upbeat on Wednesday despite a vertical fall in S&P500 after the downfall in tech stocks failed to align with the minor drop in other sectors.

10-year yields drop to 4%

A sheer optimism in market sentiment has trimmed the alpha generated by US government bonds. The returns on US Treasuries have dropped sharply despite sustained bets for a hawkish stance by the Federal Reserve (Fed). The 10-year US Treasury yields have slipped to 4% after printing a 14-year high of 4.38% last week. Inflationary pressures have not displayed signs of exhaustion yet, therefore, the odds of a bigger rate hike announcement by the Fed are rock solid.

As per the CME FedWatch tool, the chances of a 75 basis point (bps) rate hike announcement by the Fed stands at 92.5%.

US GDP data hogs limelight

A key trigger for decisive movement in the global markets will be the US Gross Domestic Product (GDP) data. According to the projections, the US economy has expanded at a growth rate of 2.4% in the third quarter of CY2022 against the de-growth of 0.6% recorded earlier. A lower print against the projections could accelerate volatility in the DXY.

Apart from that, investors will also focus on the US Durable Goods Orders data. The economic data is seen higher at 0.6% against a drop of 0.2%. In times, when the US core Consumer Price Index (CPI) is continuously accelerating, a rise in demand for durable goods could be supportive for the DXY.