empty
04.06.2024 12:41 AM
CFTC report: dollar remains under pressure

The net long USD position decreased by $3.8 billion to $14.8 billion over the reporting week, marking the fifth consecutive week of decline. The bearish bias remains intact, and the sell-off trend shows no signs of slowing down.

This image is no longer relevant

It is notable that the dollar sell-off is happening against the backdrop of nearly unchanged forecasts for the Federal Reserve's rate. As recently as mid-April, the Fed-funds futures were expecting the US central bank to cut its benchmark rate in September, with the second round expected around December or January of the following year. By the end of April, the futures market showed a steady growth in demand for USD.

Currently, expectations remain almost the same, with the first rate cut expected in September and the second in December or January. However, the dollar continues to be sold off. Apparently, a new factor has emerged, changing the forecasts.

This factor is based on growing fears that the US economy is at risk of a recession.

US economic growth for the first quarter was revised down from 1.6% rate to 1.3% due to soft consumer spending. Americans' household savings rate is declining.

Another indicator is the decline in the real estate market. Existing home sales in the US declined 1.9% month-over-month to a seasonally adjusted annualized rate of 4.14 million units in April 2024, which is almost equivalent to the worst period during the financial crisis of 2008-2011. Pending US home sales have dropped to a record low, about 15% lower than in 2008/09, and when adjusted for population growth, more than a quarter lower.

Moreover, the decline in consumer spending has had little impact on inflation. The Personal Consumption Expenditures (PCE) price index, which accounts for the average amount of money consumers spend, rose by 0.3% in April, which is 2.5 times the historical average.

The yield on 5-year TIPS, which is calculated with an inflation adjustment, reached a low on December 6th and has since resumed growth. This is a fairly accurate indicator of inflation sentiments in the business environment, and it is not decreasing. Given that the calculation of the annual inflation rate in May will start considering last year's low base, it can be assumed that US inflation may surprise everyone with its growth in the coming months.

This image is no longer relevant

If the risk of a recession becomes apparent, the government will be forced to launch a new stimulus program. However, the budget deficit as a percentage of GDP is already at its highest since 2012, excluding the COVID-19 years of 2020/21. The launch of a stimulus program will increase the budget gap to $3-4 trillion, and this huge amount of securities will have to be sold to someone. Obviously, the Fed is the main buyer, which implies a return to QE.

If events unfold this way, the dollar will become weaker. It is likely that global investors are fearing a similar scenario. Regardless of how accurate our assumptions are, we must pay attention to their actions, which signal increasing volumes of USD sales.

The US dollar remains under pressure, and there are currently no reasons to expect a bullish pivot.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

GBP/USD Overview – May 30: Justice Has Prevailed, but for How Long?

The GBP/USD currency pair closed below the moving average line on Thursday, and the dollar strengthened for three consecutive days. However, everything changed in the second half

Paolo Greco 03:51 2025-05-30 UTC+2

EUR/USD Overview – May 30: Checkmate to Donald Trump

The EUR/USD currency pair continued its slight downward movement on Thursday morning but surged sharply upward in the afternoon. We observed a strong emotional reaction from traders linked

Paolo Greco 03:51 2025-05-30 UTC+2

Trump's Authority Has Been Seriously Undermined

In this review, I will try to explore why the cancellation of Donald Trump's global tariffs is more likely to be negative for the U.S. dollar than positive. At first

Chin Zhao 00:51 2025-05-30 UTC+2

EUR/USD: FOMC Minutes, U.S. GDP, and the Legal Battle

The FOMC minutes released on Wednesday did not excite EUR/USD traders, leaving buyers and sellers unimpressed. The minutes reflected the key points from the accompanying statement and the main messages

Irina Manzenko 00:50 2025-05-30 UTC+2

The Dollar Puts on a Brave Face Amid Adversity

Don't look for a black cat in a dark room—especially if it isn't there. The verdict by the U.S. Court of International Trade declaring the White House's universal tariffs illegal

Marek Petkovich 00:50 2025-05-30 UTC+2

XAU/USD. Analysis and Forecast

The decline in gold prices below the $3300 threshold has triggered a wave of weakness, with the precious metal struggling to regain momentum. Global risk sentiment received a strong boost

Irina Yanina 19:35 2025-05-29 UTC+2

Tariff court ruling fuels new market uncertainty

What is life if not a game? Markets, like children, no sooner master one game than they're handed another. In 2024, investors fixated on how many times the Fed would

Marek Petkovich 11:28 2025-05-29 UTC+2

Opposition to Trump Within the U.S. Intensifies (Potential for Continued Growth in #SPX and #NDX)

Domestic opposition to Donald Trump is gaining momentum, which could be an unpleasant surprise for the former president. This development may limit his efforts to reshape the U.S. economic landscape

Pati Gani 09:49 2025-05-29 UTC+2

What to Pay Attention to on May 29? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Thursday. The macroeconomic event calendars for Germany, the United Kingdom, and the Eurozone are empty. Only the United States will release reports

Paolo Greco 06:58 2025-05-29 UTC+2

GBP/USD Overview – May 29: The Dollar Begins to Believe in Miracles

On Wednesday, the GBP/USD currency pair traded with a slight decline, but it's hard to believe in further strengthening the U.S. dollar under the current circumstances. On the one hand

Paolo Greco 03:32 2025-05-29 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.