The US Dollar (USD) Index maintained its strength following the latest industrial production report released by the Federal Reserve. In February, industrial production in the US expanded by 0.7% on a monthly basis, surpassing expectations and lending support to the USD. The USD Index was last observed rising 0.13% on the day, standing firm at 103.55.
The robust performance of the USD has posed challenges for currency pairs attempting to maintain bullish momentum. Contributing to the dollar's strong comeback is a mix of upbeat local data and a souring risk mood ahead of this week's pivotal central bank meetings. The Federal Reserve's report highlighted that manufacturing output rose significantly, with a notable 8.5% increase in the index for motor vehicles and parts.
"Manufacturing output rose 0.9%, boosted by a jump of 8.5% in the index for motor vehicles and parts," stated the Fed.
Capacity utilization also saw an uptick, reaching 78.2%. Despite this improvement, it remains 1.4 percentage points below its long-run average from 1972 to 2024. This indicates that while there are positive trends, there is still room for growth to reach historical norms.
The USD Index's resilience makes it difficult for the pair to sustain bullish momentum as the market adjusts to these new developments. The USD continues to weigh heavily on currency pairs due to favorable domestic statistics and heightened caution in the market ahead of important monetary policy decisions.
The Fed's report adds further complexity to the global financial landscape, as key central bank meetings loom on the horizon. Investors and market participants are closely monitoring these developments, which could influence future economic strategies and decisions.