US Dollar Index Price Forecast: Tests Immediate Support at 103.50 Near Four-Month Lows

GBP/USD pair reached to four-month high of 1.2989 on March 13.

The US Dollar could further depreciate as recent US inflation data fueled expectations of the Fed delivering rate cuts soon.

RICS Housing Price Balance fell to 11% in February, marking its second consecutive decline.

GBP/USD attempts to extend its gains for the third successive day, trading around 1.2960 during the Asian session on Thursday. The GBP/USD pair rises as the US Dollar (USD) faces headwinds amid ongoing tariff uncertainty from US President Donald Trump and growing concerns over a potential US recession.

The Greenback may further lose ground as the US inflation cooled more than anticipated in February, raising speculation that the Federal Reserve (Fed) might cut interest rates sooner than expected. Market participants are now awaiting Thursday’s US Producer Price Index (PPI) data and weekly jobless claims for further economic cues.

US monthly headline inflation slowed to 0.2% in February from 0.5% in January, while core inflation eased to 0.2%, below the forecasted 0.3%. On an annual basis, headline inflation declined to 2.8% from 3.0%, while core inflation slipped to 3.1% from 3.3%.

In the United Kingdom (UK), the latest Residential Market Survey by RICS showed that the Housing Price Balance dropped to 11% in February, marking its second consecutive decline. This figure fell short of market expectations of 20% and was lower than January’s 21% reading.

UK Prime Minister Keir Starmer expressed optimism that Britain could avoid US tariffs on steel and aluminum, emphasizing a "pragmatic approach" in negotiations while keeping all options open. Unlike the European Union (EU), which has signaled immediate retaliation against Trump’s tariffs, the UK reaffirmed its commitment to trade talks with the United States (US).

Meanwhile, the UK’s 10-year gilt yield surged to 4.68%, its highest level in two months, as expectations grew that the Bank of England (BoE) will maintain elevated interest rates for a prolonged period. Traders now anticipate just a 52 basis point (bps) rate cut in 2025, scaling back earlier forecasts for more aggressive easing. Investors are now looking ahead to Friday’s UK monthly GDP data for January, which could provide further insights into the country’s economic outlook.

Source: FXSTREET

A majority of Americans believe President Donald Trump is being too “erratic” in his moves to shake up the US economy, as his imposition of tariffs against some of the nation's top trading partners hammers stock markets, a new Reuters/Ipsos poll found.

Some 57% of respondents, including one in three Republicans, said the president’s policies have been unsteady as his efforts to tax imports have set off a global trade war, according to the two-day poll that closed on Wednesday.

Americans instead want Trump to continue to focus on combating high prices even as there are growing concerns his policies will drive costs up, not down, the poll found.

Trump’s imposition of tariffs on allies such as Canada and Mexico and his refusal to rule out a recession has spooked US markets. The S&P 500 has lost more than US$3 trillion (RM13.3 trillion) in value since its all-time peak last month.

In response, the White House has said that some short-term economic pain might be necessary for Trump to implement his trade agenda, which is intended to drive manufacturing back to the US.

Wall Street has been shaken by some of Trump's whipsaw policy reversals. On Tuesday, Trump announced more severe tariffs on Canadian metals — causing stocks to fall — and then dropped the threat later that day after Canada made a concession.

Overall, 44% of respondents said they approved of the job Trump was doing as president, unchanged from a Reuters/Ipsos poll conducted March 3-4. He got particularly weak marks on the issue of the cost of living, where just 32% of respondents approved of his performance.

And most of them — 70% including nine in 10 Democrats and six in 10 Republicans — said they expected higher tariffs will make groceries and other regular purchases more expensive.

For most of his political career, Trump — a real estate developer turned reality TV star — has pointed to the strength of the stock market as an indication of economic health. But since returning to office, he has downplayed it.

“Markets are going to go up and they’re going to go down. We have to rebuild our country,” Trump said at the White House on Monday.

That’s a sharp change in tune from his first term, when, in March 2017, Trump celebrated the Dow Jones industrial average blasting through the 21,000 mark for the first time.

"Since November 8th, Election Day, the Stock Market has posted $3.2 trillion in GAINS and consumer confidence is at a 15 year high. Jobs!" Trump at the time posted on the site now called X.

A White House spokeswoman on Wednesday urged patience, calling the market’s performance “a snapshot of a moment in time, and we expect there will be good days and there will be bad days, but ultimately, Wall Street and Main Street are going to benefit from this president's policies, as they did in his first term.”

Inflation was far and away the top concern of respondents to the poll. Six in ten respondents said that was the issue they thought Trump should prioritize, far more than those who cited other presidential priorities including reducing the size of government, addressing immigration and fighting crime.

Recession warnings

Some analysts have painted a gloomier picture. Investment bank JPMorgan sees the risk of a US recession this year at around 40%, and considers an economic downturn even more likely if Trump follows through with another planned wave of tariffs in April.

Already, the White House has steepened levies on Chinese-made goods and on Wednesday hiked taxes on a wide range of imported automotive and tractor parts, construction materials and machinery parts — much of which are purchased from Canada and Mexico. Canada and the European Union on Wednesday pledged to retaliate with their own trade barriers on US products.

Inflation, which surged under Trump's predecessor in office, Democrat Joe Biden, remains high and is expected to increase due to tariffs, analysts say.

Despite the volatility, Republicans on Capitol Hill and Trump’s supporters still support his economic vision.

Senator Roger Marshall told Reuters he believes the market was “overvalued.”

“The market is one piece of the puzzle,” Marshall, of Kansas, told Reuters. “There’s other things going on: How do we get interest rates down, bringing manufacturing jobs here. I think it’s all a pretty complicated picture.”

Others acknowledged that the declines were a worry for Americans, particularly retirees and those approaching retirement age sensitive to their retirement savings accounts.

"We all know that people who are relying on retirement accounts watch them daily. And so, I think maybe he needs to be a little more sensitive to that," said Republican Senator Shelley Moore Capito of West Virginia.

Democratic Senator Richard Blumenthal of Connecticut viewed the sell-off differently. “It may not make any difference to him, because he's a billionaire. But to the everyday investor, it's a really big deal to lose this amount of money,” he said.

Nearly 80% of Republicans in the two-day poll said they agreed with a statement that Trump's actions on the economy "will pay off in the long run," a sign that some people in Trump's party have faith in his policies even if they are nervous about the short-term effects.

Forty-one percent of respondents overall — and just 5% if Democrats — said Trump's policies would pay off eventually.

Americans for Responsible Growth, an advocacy group representing Democratic state treasurers, called Trump’s approach “chaotic” and said it was harming investors across the nation.

“What may have seemed like a quick fix in Trump’s mind has become a big mess that will not only take a long time to clean up, but has also left consumers and businesses with higher prices, fewer choices, and more uncertainty,” said Dave Wallack, the group’s executive director.

The poll surveyed 1,422 US adults nationwide and had a margin of error for all respondents of three percentage points.

Source: Theedgemarkets

GBP/USD Technical Analysis

The British Pound formed a base and started a fresh increase above 1.2800 against the US Dollar. GBP/USD broke the 1.2850 resistance to enter a positive zone.

Looking at the 4-hour chart, the pair settled above the 1.2850 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even cleared the 1.2920 resistance zone.

It seems to be aiming for a move above the 1.3000 resistance zone, which is a major hurdle for the bulls. The next major resistance is near the 1.3050 level.

The main resistance is now forming near the 1.3120 zone. A close above the 1.3120 level could set the tone for another increase. In the stated case, the pair could even clear the 1.3200 resistance.

On the downside, immediate support sits near the 1.2880 level. The next key support sits near the 1.2850 level. Any more losses could send the pair toward the 1.2800 level. The main support could be 1.2740. There is also a key bullish trend line forming with support at 1.2720 on the same chart.

Looking at EUR/USD, the pair also started a decent increase and the pair could now aim for a move toward the 1.1000 resistance.

Upcoming Economic Events:

Source: ACTIONFOREX

The Japanese Yen snaps a two-day losing streak against the USD and recovers further from the weekly low. 

Concerns about Trump’s trade tariffs and hawkish BoJ expectations continue to act as a tailwind for the JPY.

Fed rate cut bets keep the USD close to a multi-month low and contribute to capping the upside for USD/JPY. 

The Japanese Yen (JPY) edged higher against its American counterpart during the Asian session on Thursday and moves away from the weekly low touched the previous day. The chaotic implementation of US President Donald Trump's tariffs and their impact on the global economy might continue to drive demand for the safe-haven JPY. Moreover, rising bets that the Bank of Japan (BoJ) will continue raising interest rates amid broadening inflation in Japan lend support to the JPY. 

Meanwhile, hawkish BoJ expectations remain supportive of the recent surge in the Japanese government bond (JGB) yields. The resultant narrowing of the rate differential between Japan and other countries further acts as a tailwind for the lower-yielding JPY. The US Dollar (USD), on the other hand, hangs near a multi-month low amid expectations that the Federal Reserve (Fed) will cut rates several times this year. This, in turn, contributes to capping the upside for the USD/JPY pair.

Japanese Yen draws support from rising trade tensions and BoJ rate hike bets

US President Donald Trump's 25% tariff on all steel and aluminum imports took effect on Wednesday. Trump also threatened that he would respond to any countermeasures announced by the European Union and Canada.

Trump repeated his warning to reveal "reciprocal" tariffs next month on countries around the world, fueling concerns about a further escalation of a trade war and lending support to the traditionally safe-haven Japanese Yen. 

Japanese firms agreed to significant wage hikes for the third straight year to help workers cope with inflation and address labour shortages. Higher wages are expected to boost consumer spending and contribute to rising inflation.

This potential gives the Bank of Japan more room for additional interest rate hikes this year. This, in turn, keeps the yield on the 10-year Japanese government bond close to its highest levels since the 2008 Global Financial Crisis.

Meanwhile, BOJ Governor Kazuo Ueda signaled that they have no immediate plans to intervene in the bond market, and said that it is natural for long-term rates to move in a way that reflects the market's outlook for the policy rate.

Traders ramp up their bets that the Federal Reserve will have to lower interest rates this year by more than expected amid the rising possibility of an economic downturn on the back of the Trump administration’s aggressive policies.

The expectations were reaffirmed by data released on Wednesday, which showed that the headline US Consumer Price Index (CPI) rose less than expected, by 2.8% on a yearly basis in February, down from 3% in the previous month.

Additional details of the report revealed that the core CPI, which excludes volatile food and energy prices, eased from the 3.3% increase in January to the 3.1% YoY rate during the reported month. The reading was below the 3.2% anticipated.

Traders now look forward to the release of the US Producer Price Index (PPI) for a fresh impetus later during the early North American session. The fundamental backdrop, however, seems tilted in favor of the USD/JPY bears.

USD/JPY could retest multi-month low once the 148.00 mark is broken decisively

From a technical perspective, the overnight failure to find acceptance above the 149.00 round-figure mark and the subsequent pullback validate the negative outlook for the USD/JPY pair. Moreover, oscillators on the daily chart are holding deep in bearish territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for spot prices remains to the downside. Hence, some follow-through selling below the 148.00 mark could expose the next relevant support near the 147.25-147.20 region before the pair slides further below the 147.00 mark, towards retesting the multi-month low, around the 146.55-146.50 area touched on Tuesday.

On the flip side, the 148.60-148.70 zone now seems to act as an immediate hurdle ahead of the 149.00 mark and the overnight swing high, around the 149.20 region. A sustained strength beyond the latter might prompt a short-covering rally and allow the USD/JPY pair to reclaim the 150.00 psychological mark. The momentum could extend further towards the 150.55-150.60 horizontal barrier en route to the 151.00 round figure and the monthly swing high, around the 151.30 area.

Source: FXSTREET

[Quick Facts]

[News Details]

[Today's Focus]