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

What to Pay Attention to on May 13? A Breakdown of Fundamental Events for Beginners

Quite a few macroeconomic events are scheduled for Tuesday, but most are expected to have only a minor impact on the movement of both currency pairs. As a reminder

Paolo Greco 05:59 2025-05-13 UTC+2

EUR/USD. The Dollar Is Back in the Saddle. But for How Long?

The greenback is back on top: the U.S. Dollar Index hit a four-week high on Monday, responding to the announcement of a three-month truce in the trade war between

Irina Manzenko 01:01 2025-05-13 UTC+2

China Helped the Dollar Halt Its Decline

The CFTC report released on Friday showed minimal changes in overall currency positioning, with the net USD position against major currencies decreasing by a symbolic $0.1 billion to—$17.2 billion

Kuvat Raharjo 00:24 2025-05-13 UTC+2

The Dollar Takes Time to Saddle Up but Rides Fast

Investors have shifted from the "Sell America" strategy that emerged after the White House imposed tariffs to "Buy America" amid positive developments in U.S.-China trade relations. While the S&P

Marek Petkovich 00:23 2025-05-13 UTC+2

Bitcoin Has Completed Its Minimum Task

Bitcoin has broken above the 100,000 mark, entered a consolidation phase, and confirmed the familiar pattern. Previously, after breaking through psychologically significant levels, the cryptocurrency experiences a period of stagnation

Marek Petkovich 00:23 2025-05-13 UTC+2

Has Common Sense Prevailed? (High probability of #SPX growth and a drop in gold prices)

On Monday, the United States announced "significant progress" in trade talks with China following a two-day meeting in Switzerland over the weekend. Markets reacted to this news with a gap-up

Pati Gani 11:00 2025-05-12 UTC+2

GBP/USD. An Important Week for the Pound

The GBP/USD pair is again under pressure due to the broad strengthening of the U.S. dollar. Last week, the pound attempted to break into the 1.34 zone in reaction

Irina Manzenko 10:49 2025-05-12 UTC+2

The Market Will Face Reality

How quickly things change on the financial markets! Before America's Liberation Day, investors viewed the 10% universal import tariff as disastrous. Now, it's seen as the most favorable option

Marek Petkovich 09:18 2025-05-12 UTC+2

What to Pay Attention to on May 12? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic events scheduled for Monday. Fundamental developments will also be limited, but at this point, it is entirely unclear which factors are influencing price formation. The pound

Paolo Greco 06:51 2025-05-12 UTC+2

EUR/USD. Weekly Preview. Prepare for Price Turbulence

The upcoming week promises to be volatile. First, the market will react to the results of the Geneva meeting between representatives of the US and China. Second, key reports

Irina Manzenko 05:34 2025-05-12 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.