The USD dollar has been showing resilience since the reversal following the initial reaction after the FOMC meeting. After a 100 pip decline, the USD reversed and has been gaining around 200 pips across the board so far and the fundamentals point to further gains ahead.

DXY Index Chart Weekly – Facing the 100 SMA As Resistance

The research highlights the interplay between various factors affecting the strength of the US dollar (USD) in the foreign exchange (FX) markets. After the March FOMC meeting, the initial USD selloff was driven by perceived dovish signals from the Federal Reserve (Fed), such as the unchanged 2024 dot plot despite stronger economic indicators and the Fed’s tolerance for recent inflation readings.

Subsequent dovish actions from other G10 central banks, particularly the Swiss National Bank (SNB) and the Bank of Japan (BoJ), further influenced FX markets, with the USD remaining relatively strong due to converging rate cut expectations among these central banks. The SNB’s surprise rate decrease and the BoJ’s cautious rate hike contrasted with the Fed’s stance, impacting both currencies. The convergence in rate cut predictions among G10 central banks sustains rate differentials that favour the USD.

Additionally, upcoming inflation data will play a crucial role in shaping future currency movements and central bank policies. In conclusion, the research underscores the significance of global central banking dynamics in shaping FX markets and emphasizes the importance of monitoring inflation data and central bank actions for insights into future interest rate decisions and FX patterns.