The US Dollar remains in consolidation mode at the end of the week as Fed officials continue to be cautious about inflation. The Durable Goods Orders in the US fell below market expectations, but the economy remains robust with GDPNow tracking third-quarter growth at 3.4%. Investors are confident about two cuts by year-end.
The Atlanta Fed’s GDPNow model is tracking Q3 growth at 3.4%, while the New York Fed’s Nowcast model projects 3.0% growth for Q3 and 2.6% growth for Q4. Despite a slight decline in Durable Goods Orders in September, the Michigan Consumer Sentiment index beat expectations, helping the USD avoid losses.
The DXY index breached the 200-day SMA this week but is now expected to consolidate, correcting overbought conditions. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators remain close to the overbought territory, suggesting eventual losses for the index. Supports lie at 104.50, 104.30, and 104.00, while resistances stand at 104.70, 104.90, and 105.00.
Central Banks play a crucial role in ensuring price stability in a country or region by managing inflation or deflation. By adjusting their benchmark policy rate, central banks can influence savings, lending rates, and overall economic activity. Members of central bank policy boards have varying beliefs on how to control inflation, with ‘doves’ advocating for loose monetary policy to boost the economy, while ‘hawks’ prefer higher rates to control inflation.
Central bank members work towards creating a consensus on monetary policy decisions, with a chairman or president leading meetings and communicating the outlook to the market. Central banks aim to implement policy changes without causing significant market disruptions, and members observe a blackout period leading up to policy meetings to avoid public statements that could impact market expectations. The central bank’s goal is to maintain stability in inflation and the economy while responding to changing economic conditions.
