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DXY Under Pressure as Fed Calls for Fiscal Stimulus

15th October 2020

The Australian Dollar tanked in the Asian session after the Governor of the RBA suggested that additional easing could be coming next month.
Jobless claims data could drive the outlook for the US Dollar particularly in the absence of fiscal stimulus.
US Dollar Index (DXY) could bounce northwards short term as price holds above a key support.

The safe haven US Dollar and Japanese Yen rallied hard in the Asian session as optimism surrounding a US covid relief package prior toto presidential election on November 3 faded

Comments from Reserve Bank of Australia Governor Phillip Lowe hinting at a 15-basis point cut and an expansion to the bond buying program in November sent the Aussie Dollar tanking.

Gold slipped 0.2%. Silver declined towards $24/oz and US 10-year Treasury yields dipped back to 0.7%.

LUS jobless claims figures and a speech from European Central Bank President Christine Lagarde are in focus.

Jobless Claims Data To Direct USD?

Jobless claims data could drive the short-term outlook for the USD after Treasury Secretary Steven Mnuchin’s comments dampened optimism surrounding fiscal stimulus .

It is increasingly unlikely that a relief package will be agreed before the elections. This could cause concern for Chairman Jerome Powell and the Federal Reserve after the minutes from the latest Fed meeting revealed that the central bank believes that economic growth could decelerate rapidly in the absence of additional stimulus..

Federal Reserve Vice Chair Richard Clarida also highlighted the need for further stimulus.

It remains to be seen if the Fed will adjust its monetary policy stance on the baxk of the latest developments surrounding fiscal stimulus..

Economic data will likely drive sentiment particularly given the Congressional deadlock continues. Jobless claims data could highlight the need for further fiscal support, boosting the safe haven US Dollar.

An upbeat figure could calm investors nerves and lift demand for safe haven may soothe investors’ concerns and steer capital flows back into risk-sensitive assets.