The united states dollar index or it is also called as DXY skyrocketed more than 1 percent to hit a daily high of 104.85 in European session trading on Tuesday (3/January).
It happened before this major currency finally slumping to 104.45 as it entered the New York session. The greenback is looking to break the bearish pressure that overwhelmed it over the end of last year.
That was occured ahead of the release of the FOMC meeting minutes and Nonfarm Payroll data this week. The US dollar strengthened rapidly in the first European session of 2023.
No big impact news has yet been a significant catalyst, but a resurgence of volatility and market activity is likely to be favorable for the greenback. Various major currencies are failed to against the US dollar.
Some Currencies are Under Pressure
Several pairs such as EUR/USD, AUD/USD, and NZD/USD each subsided more than 0.8 percent at the end of the European session. GBP/USD also continues to be under pressure in the 1,2020s range.
The American dollar only weakened against the yen, with the USD/JPY slumping in the 130.40s range for a second straight day. FX came back to life this morning with the dollar moving from a low.
That was said by Kenneth Broux, an analyst at Societe Generale. The average reversal in yields (bonds) and dollar movements occurred on this day without any new macro news.
This suggests that last week's increase in yields and dollar weakness were overstated. Besides that, it was also associated with a lack of year-end liquidity in the market.
US dollar Tends to Strengthen Every January
Seasonal trends indicate that the US Dollar tends to strengthen every January. That is why; their rival currencies are in danger of weakening further.
Nevertheless, the United states dollar rate will continue to be affected by market perceptions, central bank decisions, and economic developments. In the short term, market participants need to monitor the release of the FOMC meeting minutes on Wednesday.
Besides that, they also need to watch the Nonfarm Payroll data on Friday. The results of the December FOMC meeting revealed the Fed's intention to keep interest rates high for a longer period of time in order to control inflation.
Markets will examine the background of the Fed's opinion in its minutes. Furthermore, they will seek to gauge the suitability of the policy plan to the current economic conditions
China’s PMI Manufacture is Beyond the Expectation
China's manufacturing activity reportedly weakened from 49.4 to 49.0 in Tuesday's Asian trading session (03/January). That was quite far from the prediction.
Despite showing a decline and still within the contraction zone, the manufacturing PMI result this time was better than the previous market expectations which predicted a slump to 48.8.
The manufacturing sector plays an important role in China's economy. The reason is, this sector is directly related to exports which have contributed as the main support for China's economic growth in addition to domestic consumption.
Manufacturing output slowed substantially last year, largely due to COVID restrictions and worsening overseas demand. Both supply and market demand for manufactured products continued to decline until last month (December).
China’s Economy in 2023 will be Better
Efforts to contain the pandemic are the biggest obstacles affecting production and sales. It came with the output sub-index and total new orders persistently below the 50 threshold for the 4th and 5th consecutive months.
That was stated by Wang Zhe, a senior economist at Caixin Insight Group said in a note. The Chinese government recently announced it would relax COVID restrictions despite a surge in cases in some regions.
Therefore, the market is generally optimistic about the economic recovery in 2023. That's reflected in a recent report that showed optimism in China's producer business during December.
Some experts also predict that Chinese authorities will announce massive stimulus to boost the pace of the economy after experiencing a slowdown throughout 2022.
