The index of US dollar or known as DXY declined by 0.65 percent and reached the level around 102.90. That was happened in a Friday trading, 29 of April 2022. What are the triggers?
It is actually because of the marker participants who made the profit taking action after a dissapointing United States GDP Data release. Some other major currencies grabbed this chance to be strong again.
It is especially the Pound Sterling, Australian dollar, and Euro. Nevertheless, the expectations of a Fed rate hike still support the U.S. dollar rate in the upper range.
The US dollar remains likely to end this April with the most impressive monthly gain in two decades. However, some situations may appear and happen in the market again.
GDP Made A Growth of -1.4% for Quarter over Quarter
The America’s Bureau of Economic Analysis reported that the Gross Domestic Product or GDP made a growth of -1.4% for quarter over quarter. That was based on a preliminary report for the I/2022 quarter released on Thursday.
The economic slowdown happened because of so many factors. The examples are corona virus cases increase, raising trade balance deficit, The Russo-Ukrainian war, and a rapid spike in inflation.
Fortunately, the consumer spending remains elevated and supportive for U.S. GDP growth going forward. That is why; market participants are still waiting for a further move.
A Sudden Contraction Affects the Dollar Position
The United States remains one of the best-performing economies amid the threat of an economic slowdown due to lockdowns in China. That is also caused by wars in Europe.
The growth slowed in the first quarter, likely to recover in later periods. The surprising contraction in growth has sent the dollar into a number of profit-takings after its stunning surge this week
It was informed by Joe Manimbo as a senior analyst at Western Union Business Solution. The dollar broke through to new 5-year highs as it remained the currency of choice amid heightened concerns about global growth.
In the other words, the fall in GDP is not as bad as it seems. This is because the largest burden of GDP in 1Q/22, such as net inventories and exports, is also the most volatile component.
50 basis Point Is a Possible Value for an Interest Rate
The component above is likely to increase in the coming quarters. Analysts say that a single U.S. GDP report is not enough to get the Federal Reserve to cancel its planned interest rate hike.
As a result, the Fed is still expected to raise those interest rates by 50 basis points at the FOMC meeting next week. The Fed has worked hard to communicate to the market until it reaches its current situation.
That is why; one surprisingly weak GDP data won't make it all a bit of a difference. It is worth noting that USD/JPY pair is still above the 130.00 threshold despite having experienced a decline of more than 0.5 percent.
That was since the opening of the Asian session until the middle of the European session today. This kind of condition is also noted by the market participants to take a further action.
The BOJ Interest Rate is Still Low
This currency pair is the most sensitive one in the market. That is especially for the interest rate expectation change so that a stability beyond 130,00 means something.
It means that the interest Rate expextatoon of the Fed is still high. Vice versa, that also an sign that the BOJ rate is quite low. The analysts are attracted to see what is going further in the forex market.
The decisions made at a further meetings will be the important point. The currency pairs position may change.
