- The index moves higher and surpasses the 97.00 handle.
- Extra gains in the buck came on the back of dovish ECB.
- The ECB re-assessed its forward guidance. Announced TLTROs.
The demand for the greenback is gathering fresh traction on Thursday, lifting the US Dollar Index (DXY) to fresh weekly highs beyond the key 97.00 mark.
US Dollar Index boosted by dovish ECB
The index has quickly reverted the initial pessimism and climbed to new highs above 97.00 the figure following the slump in EUR in response to the dovish tone from the ECB at its meeting today.
In this regard, the ECB announced fresh 2-year TLTROs starting in September, while key rates are now expected to remain at current levels for the rest of the year. Sticking with the ECB, economic growth in the euro area has been revised lower for the next years along with prospects of inflation.
Of lesser relevance today, Initial Claims rose 223K on a weekly basis, taking the 4-Week Average to 226.25K from 229.25K. In addition, Nonfarm Productivity expanded 1.9% inter-quarter in Q4 and Unit Labor Costs rose 2.0% inter-quarter during the same period. Later in the NA session, FOMC’s mega-dovish member L.Brainard is due to speak on economy and monetary policy outlook.
What to look for around USD
The US-China trade talks remain in centre stage ahead of the Trump-Xi meeting expected later in the month. The greenback is also expected to stay somewhat cautious on fresh criticism by Trump to the Fed’s monetary policy and the level of the buck. However, the health of the US economy has come back to the fore following auspicious results from the Q4 GDP and other key indicators as of late, which appear to have not only motivated USD bulls to return to the markets but also poured cold water over speculations of a potential halt of the Fed’s tightening cycle.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.36% at 97.22 facing the next hurdle at 97.37 (2019 high Feb.15) seconded by 97.71 (2018 high Dec.14) and finally 97.87 (monthly high Jun.20 2017). On the flip side, a break below 96.64 (21-day SMA) would open the door to 96.22 (38.2% Fibo of the September-December rally) and then 95.82 (low Feb.28).