The US dollar index fluctuates near the 99 mark, GDP and PCE data are coming

On Wednesday, the US dollar index hovered around 99, and the current market sentiment towards the US dollar is obviously in a state of caution. On the one hand, the continued weak economic data has caused concerns about the recession of the US economy; on the other hand, inflation pressure still exists, which has brought huge policy dilemmas to the Federal Reserve. Market participants are weighing the contradiction between slowing economic growth and sustained high inflation, which leads to increased market volatility.

Analysis of major currencies

United States dollar: As of press time, the US dollar index hovers around 99.16, and the US dollar faces continuous downward risks. First, the Fed faces severe balance challenges and needs to choose between inflation and economic growth. This policy uncertainty puts pressure on the US dollar. Secondly, although tariff-related developments have provided support to the US dollar in the short term, they may intensify inflationary pressure in the long term and further limit the Fed's policy space. Analysts believe that from a technical point of view, as long as the US dollar index remains below 100.00, the medium-term trend will remain bearish, and the next important support range is between 96.90-95.50. In terms of technical indicators, MACD shows that the DIFF value is -1.2637, the DEA value is -1.3104, and the MACD value is 0.0933, indicating that the short-term momentum is still weak. The RSI (14) reads at 36.9555, which is in a weak neutral area but has not yet entered an oversold state. CCI (14) is -59.9033, which also indicates that the market is short but has not reached an extreme level. Judging from the K-line pattern, the US dollar index recently broke through the important psychological threshold of 100.0000, and then formed a temporary low at 97.9229. It is currently trying to return to 100.0000 above.

Euro: As of press time, the euro/dollar hovered around 1.1391, and the US dollar (USD) fell slightly against the euro (EUR) as US economic data was lower than expected. German economic data and the U.S. personal consumption expenditure price index (PCE) report for March will be the focus later on Wednesday. Traders will closely monitor preliminary estimates of Germany's retail sales, consumer price index (CPI) and first-quarter gross domestic product (GDP). At the same time, preliminary data on the first quarter GDP growth rate of the euro zone will also be released on the same day. If the report shows that the results are stronger than expected, this could boost the euro in the short term. Technically, on the positive side, the bullish structure remains intact as the 20-day simple moving average is 1.1240, the 100-day moving average is 1.0659, and the 200-day moving average is 1.0774. The exponential moving average also supports this prospect, with the 10-day EMA at 1.1357 and the 30-day EMA at 1.1149, further strengthening the upward trend. Support is near 1.1380, followed by 1.1357, further supporting is near 1.1249. On the upward trend, the resistance is around 1.1395. While short-term signals may suggest some hesitation, the broader technical framework still tends to be bullish continuation as long as the pair remains above the key support zone.

GBP: As of press time, GBP/USD hovered around 1.3410, and the GBP exchange rate fell as traders became increasingly convinced that the Bank of England (BoE) would cut interest rates at its policy meeting in May. Reasons that have driven the rise in dovish expectations for the Bank of England include easing inflation expectations in the UK and rising global economic tensions. Technically, the next major resistance is around 1.3550. If the closing price is above the 1.3550 line, it may set the tone for further rises. In this case, the pair may even break through the resistance level of 1.3620. On the downside, the instant support is around the 1.3400 level. The next key support is around the 1.3350 level. If there is a further decline, the pair may fall to the 1.3330 level. Similarly, https://www.avatradescn.com is also formed on the 4-hour chart, with an upward connection trend line, with the support level at 1.3320.

Foreign Exchange MarketSummary of news

1. Trump boasted about his 100-day political achievements and said he understood interest rates better than the Federal Reserve Chairman

Just as Americans were worried about Trump's economic management, Trump boasted "a series of major economic victories" at a rally in Michigan on Tuesday and lashed out at Democrats, including former President Biden. This rally was to celebrate his ten-thousand days in office. “We have the greatest economy in our history,” Trump said of his first term of presidency (2017-2021) and we are doing well and we are doing better now. Trump once again slammed the Fed, telling supporters that inflation has basically dropped and interest rates have dropped, and even though one of my Fed officials hasn't really done their job well, I won't say who it is. I want to be very friendly and respectful to the Fed. Trump went on to say, “You should let him do your own thing, but believe me, I know more about interest rates than he did.” The rally is similar to the rally that Trump has held throughout his political career, where he slammed the “radical left-wing madman”, held a brief oral debate with a questioner and asked what people like most about Biden’s nickname, even though Biden has been out of office for more than three months.

2. Goldman Sachs significantly lowered its GDP growth rate in the first quarter to -0.8%. Goldman Sachs' latest research report stated that the US www.avatradescn.commodity trade deficit in March expanded significantly exceeding expectations. Imports and exports of goods both increased in March. The main reason for the widening trade deficit is the increase in imports of consumer goods, which may reflect the "snatch-up" of imports before tariffs are raised. Details of the Leading Economic Indicators report show that import growth is significantly stronger www.avatradescn.compared to our previous GDP tracking assumptions, but export growth has moderately strengthened and inventory accumulation has accelerated. Overall, we lowered our first-quarter GDP tracking forecast by 0.6 percentage points to -0.8% (quarterly annualized quarterly). The U.S. GDP data will be released on the evening of the 30th.

3. Concerns about tariffs drag down economic outlook. US consumer confidence plummeted to a nearly five-year low in April.

The US Consultative Chamber of www.avatradescn.commerce consumer confidence index fell to a nearly five-year low in April, as concerns about tariffs dragged down economic outlook. Data from the U.S. Chamber of www.avatradescn.commerce showed that the consumer confidence index fell 7.9 points in April to 86.0, the lowest level since May 2020. "Consumer confidence fell for the fifth straight month in April, down to its lowest level since the outbreak of the new crown epidemic." U.S. GDP data is expected to be released to show a sharp slowdown in the first quarter as businesses www.avatradescn.compete to import goods to avoid rising costs from tariffs, resulting in a surge in imports. Consumer spending could also slow sharply, dragged down by high inflation and concerns over the economic impact of tariffs will prompt some households to cut their consumption to ensure storage.

4. ECB survey: EurozoneInflation expectations rose before U.S. tariffs

European Central Bank survey on Tuesday showed that eurozone consumers raised inflation expectations for the www.avatradescn.coming years before the United States imposed tariffs on most countries and launched a global trade war that could weaken economic growth. Inflation expectations for the next 12 months are 2.9%, up from 2.6% surveyed last month; inflation expectations rose from 2.4% to 2.5% in the next three years. Although such a rise often arouses the ECB’s vigilance, the data was collected before the U.S. imposes tariffs, and tariff policies have fundamentally changed the global economic outlook. The strengthening of the euro, falling energy prices and economic growth may weaken, all of which may reduce price growth. The ECB cut interest rates again in April as outlooks changed dramatically and warned of weak economic growth. Some policymakers even see the risk of inflation target losing 2% again.

5. Analysts: Canada's ruling party fails to win a majority increase uncertainty

CharUCHANANA, chief investment strategist at Saxo Bank in Singapore, said that Canada's ruling Liberal Party did not win a majority in the House of Representatives, adding uncertainty at a delicate moment, the risk of an economic recession is rising, the more difficult U.S. trade negotiations are imminent, and the demand for diversified trade relations is growing. Political divisions could limit the scale of fiscal stimulus for Canada’s economy, and investors may worry that Canada will not get a buffer for domestic growth when facing tough external negotiations. Analyst Matt Simpson said investors now have two things they don’t like: uncertainty and a minority seat government, which could mean trade negotiations will not go as smoothly. Investors are still on the wait-and-see state before the release of this week's important U.S. report, though news about a few governments may help the U.S. dollar/Canadian dollar gain a few buying in the short term.

Institutional View

1. Capito Macro: The impact of tariffs on the euro zone economy will intensify

Capito Macro analyst Franziska Palmas said the decline in the euro zone economic confidence index shows that U.S. tariffs have hit economic activity to a certain extent in April, and the short-term boost from previous procurement before tariffs may be fading. The euro zone economic prosperity index fell to 95.2 in April, weaker than expected. Both the industrial and service industry indexes declined, and consumer confidence dropped sharply. There are more signs that the job market is slowing as hiring intentions fall further, consistent with job stagnation. As tariff drags will intensify, we expect the euro zone GDP to grow almost no more in the next six months.

2. Dutch International: The euro has lost its status as a substitute for the dollar.

Dutch International Group analyst Francisco Pesolle said in a report that investors had previously been worried about US President Trump's trade policy and gave up the dollar, but now the euro's momentum as the first-choice (alternative) currency has weakened. Most G10 currencies have performed better than the euro this week. Massive power outages in Spain and Portugal could further hit the euro, although there are other factors. Options markets show that the euro is the worst overbought currency, and speculators may lift bets on a strengthening euro if the first-quarter euro zone economic growth data released on Wednesday are weaker than expected. Pessole said recent concerns about possible weak U.S. economy and optimism about Germany's fiscal stimulus may have distracted market concerns about weak euro zone economy.

3. Morgan Stanley: The uncertainty of tariff policy, coupled with the questioning of the Fed's independence, may lead to foreign capital reducing investment in the US

The Morgan Stanley report pointed out that the uncertainty of the US government's tariff policy, especially the repeated policy repetitions, and the questioning of the Fed's independence has caused concerns among foreign investors who have heavy holdings in US assets. Such concerns are difficult to eliminate once they form, which may lead to foreign capital reducing investment in the United States and turning to non-U.S. assets—especially when allocating new funds. At the same time, its currency hedging ratio to its U.S. assets exposure may rise, both of which may continue to drag the dollar down.

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