The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, held its upward momentum on Monday, tallying a four-day recovery. Strong S&P Services PMI as well as caution from Atlanta Federal Reserve President Raphael Bostic is benefiting the buck.
US Dollar rises as economic signals clash with Fed caution
S&P Global Composite PMI rose sharply, showing improved economic momentum in March, led by robust service sector growth.
Manufacturing PMI disappointed, slipping into contraction territory below 50 and falling short of market expectations.
Services PMI exceeded forecasts, offering optimism about consumer demand and economic resilience as it rose to 54.
Atlanta Fed President Raphael Bostic emphasized ongoing uncertainty, stating that inflation progress may be slower than previously projected.
On the DXY's daily chart the Fed's sentiment index has significantly rise above hawkish territory which also add momentum to the USD.
Bostic trimmed his 2025 rate cut expectations, citing persistent price pressure and trade-related risks.
US trade tensions were flagged as a concern with Bostic noting their potential drag on monetary policy decisions.
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Source: Fxstreet