USD Index depreciates on dovish tone surrounding Fed’s rates trajectory, clings to 104.20

• US Dollar Index extends its losses after mixed US key figures from the United States.
• US ISM Services PMI fell to 51.4; ADP Employment Change added 184K in March.
• Fed’s Powell stated that interest rate is likely at its peak in the current cycle.

The US Dollar Index (DXY), which gauges the value of the US Dollar (USD) against the six major currencies, remains in the negative territory for the third successive day, hovering around 104.20 during the Asian trading hours on Thursday. The Greenback faced challenges due to the dovish tone surrounding the Federal Reserve’s (Fed) interest rates trajectory.

Investors across the Atlantic have fully priced in a 25-basis point cut by the Federal Reserve in July. On Wednesday, US ADP Employment Change added 184K in March, surpassing February's hike of 155K and exceeding the market consensus of 148K, highlighting the labor market’s resilience. Meanwhile, the US ISM Services PMI fell to 51.4 from 52.6 in February, falling short of the expected level of 52.7.

In his remarks at the Stanford Graduate School of Business, Federal Reserve Chairman Jerome Powell reiterated once again that the policy rate is likely at its peak in the current cycle. He stated the US central bank's readiness to implement rate cuts, emphasizing a data-dependent approach.

Additionally, Atlanta Fed President Raphael Bostic also advocated for a rate cut in the final quarter of 2024. Adriana Kugler, a member of the Fed Board of Governors, emphasized that the ongoing disinflationary trend would require rate reductions, with expectations of at least three cuts by the last quarter of 2024.

Market participants are anticipated to closely monitor the release of US labor data, with Initial Jobless Claims for the week ending on March 29 scheduled for Thursday, and Average Hourly Earnings and Nonfarm Payrolls data set to be released on Friday.