US Dollar Continues to Rise on Hawkish Fed Comments and Strong Data Releases

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The US dollar kicked off the new week on a strong footing, building on Friday's gains against major currencies. The bullish sentiment was boosted by hawkish comments from Federal Reserve officials, including Christopher Waller, who emphasized the need for tight monetary policy for a longer period than the markets anticipate. The markets are now pricing in an over 80% chance of a 25 basis points Fed rate hike in May. Despite the recent decline in retail sales, the US dollar index, which tracks the USD's performance against six major currencies, extended its recovery toward 102.00.

The benchmark 10-year US Treasury bond also continues to rise, touching 3.5% on Friday, while Wall Street's main indexes opened mixed as investors focused on earnings figures. However, the recent macroeconomic data releases have been mixed. For instance, while the University of Michigan's consumer confidence index improved modestly to 63.5 in April's flash estimate from 62 in March, the one-year consumer inflation expectation component of the survey climbed to 4.6% from 3.6% in March, boosting the USD.

On Wednesday, the Federal Reserve will release the Beige Book, which is expected to highlight slowing activity, softening labor markets, and easing price pressures. According to analysts at BBH, the Beige Book could support a pause after the expected 25 bp hike while leaving the door open for further tightening if necessary. In terms of technical analysis, the EUR/USD pair is staging a correction, with the first technical support at 1.0900, followed by 1.0760 and 1.0700. If the pair manages to stabilize above 1.1000, 1.1100 could be seen as the bullish target, followed by 1.1160 and 1.1200.

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