USD Index loses momentum despite easing dovish Federal Reserve bets

The USD Index has shown a decent correction after failing to extend its upside journey to the critical resistance of 103.00. It looks like the USD Index has failed to capitalize on easing dovish Federal Reserve (Fed) bets after Federal Reserve chair Jerome Powell anticipated one more rate hike in 2023. As per the CME Fedwatch tool, chances of an unchanged monetary policy in May have trimmed quickly to 50%.

In March’s monetary policy meeting, Federal Reserve Powell also stated that one more rate hike is still needed after pushing rates to 4.75-5.00%. The discussion looks encouraging about the month when Federal Reserve Powell will put the last nail in the coffin.

For further clarity, US core Personal Consumption Expenditure (PCE) Price Index data will be keenly watched, which will release on Friday. As per the consensus, monthly core PCE would accelerate by 0.4%, lower than the former expansion of 0.6%. The annual figure is expected to remain steady at 4.7%.

Fears of US banking crisis receded further

US authorities have put their blood and sweat into restoring the confidence of investors in the troubled banking system after the collapse of three mid-size banks. The administration is not considering an expansion of blanket insurance for all deposits but has come forward with more measures.

Bloomberg reported that the private meeting between Federal Reserve Powell and US lawmakers has also discussed the agenda of raising insurance limits for deposits after the collapse of Silicon Valley Bank (SVB) and Signature Bank. Currently, the Federal Deposit Insurance Corporation (FDIC) currently insures up to $250,000 per depositor.

On Wednesday, Federal Reserve (Fed) Vice Chair for Supervision Michael Barr told Senate Banking Committee that the United States banking system is ‘sound and resilient’. He assured investors that the failure of a couple of lenders is unable to lead to a widespread contagion.