Markets are pricing more than one Fed interest rate reduction for 2025. Despite this expectation, the dollar returns with stronger job data than expected. Market analyst James Hyerczyk is trying to determine the direction of the dollar in the light of the latest data.
The dollar is at the technical intersection in the middle of mixed signals
Markets digests more powerful employment data than expected against increasing concerns about trade tensions. In this environment, the dollar faces various pressures. Investors closely monitor the movement of the dollar. For the dollar index (DXY), 101.267 is among the basic technical levels in which the support and upward resistance is on 103,984. Now the potential target looks less than 100.00. This mixed appearance reflects the wider market uncertainty. Because, with the expectations of interest policy adjustment, the risk of stagnation is increasing.
Daily US Dollar Index (DXY)Labor Market Data Supports Dollar
The dollar found support from March employment data. March employment data has significantly exceeded 140,000 estimates and recorded 228,000 new jobs. This solid report shows economic strength. Thus, it helps to reduce the losses of Treasury returns and provided short -term stability for the dollar. The unemployment rate rose to 4.2 %, but the general power markets surprised. This stopped for a moment of the fall of the dollar against the main currencies. February employment data were revised to 117,000, implying that there was some moderation in the previous months.
Interest reduction expectations are intensifying
Markets are now pricing at least four Fed interest rate cuts for 2025. Meanwhile, the possibility of five discounts increased from 18.3 %to 37.9 %in one day. In June, a half -point discount rose from 15.9 %to 43.8 %. This change usually affects the valuation of the dollar by reducing return advantage. However, former Vice President Roger Ferguson claimed that inflation concerns could prevent any interest rate cut this year. This indicates that it can create a potential base for the weakness of the dollar.
What’s next for the dollar traders?
JPMorgan increased the probability of recession from 40 %to 60 %. In addition, stock markets continue to be under pressure. Therefore, the sense of market has been significantly broken. The forces of safe port flows against growth concerns create a challenging environment for the dollar.
Traders should closely monitor the upcoming inflation data and FED communications. Will the Central Bank prioritize the fight against inflation or support growth in this increasingly complex economic environment?
