- The US Dollar Index edges to 99.60 as the Taiwan Dollar posts the biggest intraday jump in over 30 years.
- ISM Services PMI climbs to 51.6 in April, beating estimates and March’s 50.8 reading.
- Treasury Secretary Bessent says trade deals may be reached this week; deficit reduction targeted.
- Market activity remains thin with holidays in China and the United Kingdom.
The US Dollar Index (DXY), a benchmark that gauges the dollar’s strength against a basket of six major currencies, experienced modest gains on Monday, even as the Taiwan Dollar (TWD) registered a remarkable surge of over 5%. This significant movement spurred a broader rally across Asian currencies, fueled by speculation surrounding foreign exchange conversions undertaken by exporters. Trading volumes were notably subdued as multiple public holidays impacted market liquidity.
Daily digest market movers: US Dollar tumbles on Taiwan FX move and trade deal hopes
- US Treasury Secretary Scott Bessent indicated that the United States could potentially finalize several trade agreements as early as this week, fostering a sense of optimism among investors.
- Secretary Bessent expressed confidence that 17 trading partners, excluding China, have submitted “very good” proposals that are currently under review by the US government.
- The Treasury Secretary anticipates that the US economic growth rate could potentially return to 3% by this time next year, contingent upon the successful implementation of current economic plans and policies.
- He also mentioned a strategic objective to lower the Congressional Budget Office’s (CBO) projections and reduce the federal deficit by approximately 1% annually, aiming for greater fiscal responsibility.
- Secretary Bessent highlighted the robust growth in private credit as an indicator that US banking regulations may be overly restrictive and warrant adjustments to foster further economic expansion.
- He further noted that China has primarily presented public offers during trade negotiations, with no new developments or concessions disclosed privately, suggesting a potential impasse in behind-the-scenes discussions.
- The Taiwanese Dollar’s extraordinary 5% surge, marking its most significant intraday increase since the early 1990s, triggered widespread selling of US Dollars across Asian foreign exchange markets.
- Market participants believe that exporters in Taiwan are actively converting their US Dollar holdings in anticipation of an appreciating domestic currency, aiming to maximize their trade gains and profitability.
- Negotiations between Taiwan and the United States reportedly commenced with their first official meeting on May 1, although the specific outcomes and details of the discussions remain undisclosed.
- Market activity was unusually subdued due to holidays in both China and the United Kingdom, which exacerbated volatility in the foreign exchange markets and contributed to wider price swings.
- The Institute for Supply Management (ISM) Services PMI increased to 51.6 in April, surpassing both the March reading of 50.8 and analyst expectations, signaling continued expansion within the US service sector.
- The Employment Index from the same ISM report rose to 49.0, indicating a degree of improvement in the labor market within the service industry, although still slightly below the expansionary threshold of 50.
- The Prices Paid Index jumped to 65.1, raising concerns that underlying inflationary pressures may persist despite recent moderation in headline inflation figures, potentially influencing future monetary policy decisions.
- Despite the positive ISM data, the US Dollar Index experienced a decline, primarily influenced by external foreign exchange dynamics and reduced expectations for further interest rate hikes by the Federal Reserve.
- Traders are increasingly confident that the Federal Reserve will maintain current interest rates steady within the 4.25%–4.50% range at the upcoming Federal Open Market Committee (FOMC) meeting, reflecting a shift in market sentiment.
Technical Analysis
The DXY Index is currently trading at 99.93, reflecting a 0.08% increase on the day, and fluctuating within a daily range of 99.46 to 100.05. Momentum indicators remain neutral, with a Relative Strength Index (RSI) of 40.84, while the Moving Average Convergence Divergence (MACD) indicator is signaling a potential buy opportunity. However, the 20-day, 100-day, and 200-day simple moving averages, positioned at 100.13, 105.38, and 104.39 respectively, collectively suggest a continued bearish outlook for the US Dollar. Further downward pressure is indicated by both the 10-day and 30-day Exponential Moving Averages (EMAs), which are currently situated at 99.77 and 101.09. Key support levels are identified at 99.60, while resistance levels are observed at 99.77, 100.08, and 100.13. These technical indicators provide a mixed outlook, suggesting potential for both upward and downward price movements in the near term.
