US Dollar Index slides towards 102.50 as Fed talks appear easy, sentiment improves on banking news

• US Dollar Index renews intraday low while extending the week-start fall.
• Risk-on mood weigh on US Dollar’s haven demand, especially when Fedspeak lacks hawkish rhetoric.
• Easing fears from banking fallouts add strength to the risk profile ahead of top-tier US data.
• US CB Consumer Confidence could direct intraday moves but Core PCE Price Index is the key.

US Dollar Index (DXY) bears the burden of the market’s risk-on mood, as well as the absence of hawkish comments from the Federal Reserve (Fed) policymakers, during early Tuesday. In doing so, the greenback’s gauge versus the six major currencies drops for the second consecutive day while renewing the intraday low near 102.70 by the press time.

An active battle with the banking turmoil by the US and European policymakers seems to have triggered the latest risk-on mood. Among the major catalysts are the respective authorities’ extension of credit services to a larger umbrella of banks. On the same line were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, the latest comments from Federal Reserve Governor Philip Jefferson and the US Dollar’s safe-haven demand could be linked to the DXY’s fall, not to forget downbeat US data. “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains,” said Fed’s Jefferson.

Further, Federal Reserve Vice Chair for Supervision Michael Barr's prepared testimony to Congress reads, “We are prepared to use all of our tools for any size institution as needed to keep the system safe".

It should be noted that Fed Chairman Jerome Powell tried to push back the doves in the last monetary policy meeting but could not and hence the hawks appear to lose control.

Talking about the data, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Against this backdrop, Wall Street closed mixed, losing some of the intraday gains in the late hours, whereas yields rebound after a four-week downtrend.

Moving forward, the US Conference Board’s (CB) Consumer Confidence for March will join the second-tier housing data to entertain DXY traders as they seek clues of more inflation pushing the Fed policymakers towards further rate lifts.

Technical analysis

A failure to cross the 50-DMA hurdle during the previous week’s run-up, around 103.50 by the press time, directs the US Dollar Index bears towards the monthly low of 101.91.