Asian session review: the US dollar traded steadily against major currencies

During today's Asian trading, the US dollar consolidated against major currencies after a significant drop the day before, caused by weak data on activity in the service sector. 

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.02% to 104.21. Yesterday, the index fell by 0.53%, as a report from the Institute of Supply Management (ISM) showed that the growth of the service sector in the United States slowed further in March. The index of business activity in the non-manufacturing sector fell to 51.4 from 52.6 in February. This was the second monthly decline in the index in a row after the recovery in January. A reading above 50 indicates an expansion in activity in the service sector, which accounts for more than two thirds of the economy. Economists had predicted that the index would be 52.6. In addition, yesterday, Fed Chairman Powell said that policymakers would need some time to assess the current state of inflation, so the timing of a potential interest rate cut remains uncertain. Speaking specifically about stronger-than-expected price pressures at the beginning of the year, the head of the central bank said that the Fed was in no hurry to ease monetary policy. Powell confirmed that decisions are being made "meeting by meeting," and noted only that rate cuts "will probably be appropriate ... at some point this year." However, markets continue to forecast three interest rate cuts from the Fed this year, with the first cut still expected in June. According to the CME FedWatch Tool, markets see a 1.3% probability of a 25 basis point rate cut at the Fed meeting in May, and a 62.3% probability of a rate cut in June (compared to 63.7% yesterday). The next event that may affect the outlook for rates will be the publication of the labor market report (on Friday). If data shows that the U.S. economy created more jobs than expected in March, or an acceleration in annual wage growth, it could strengthen bets that the Fed will push back the timing of its first interest rate cut and revise the forecast for rate cuts for 2024 from three to two.

The Australian dollar rose 0.4% against the US dollar, helped by statements by Fed Chairman Powell. Experts believe that by July, the Fed will likely have sufficient confidence to begin cutting rates, while the Central Bank of Australia is likely to keep rates at the current level until November.