Hong Kong Wind Information reports that on the morning of October 14th, the US Dollar Index remained strong, lifting by more than 170 basis points, with a clear upward trend. Prior to this, the US Dollar Index had been rising for two consecutive weeks, increasing from a phase low of 100.1528 to above 103.

Four major factors have contributed to the rebound of the US Dollar Index:

1. Good performance of US economic data:

The non-farm employment data for September in the United States exceeded market expectations, with the unemployment rate falling unexpectedly, indicating that the job market still has resilience. A strong job market is usually seen as an important sign of a healthy economy, which has strengthened investors' confidence in the US economy and provided support for the US Dollar to strengthen. In addition, inflation data slightly exceeded expectations: the US CPI rose by 2.4% year-on-year in September, higher than the expected 2.3%; the core CPI rose by 3.3% year-on-year in September, and increased by 0.3% month-on-month, both slightly exceeding expectations. Inflation data to some extent affects the market's expectations for the Federal Reserve's monetary policy, and slightly higher inflation data makes the market believe that the Federal Reserve may not be too aggressive in cutting interest rates, thus supporting the US Dollar.

2. Adjustment of expectations for Federal Reserve rate cuts:

After the Federal Reserve started the interest rate reduction cycle in September with a "big turn" of 50 basis points, the market was initially quite optimistic about its subsequent interest rate reduction pace. However, the performance of recent economic data has led to a significant adjustment in the market's expectations for interest rate cuts by the Federal Reserve within the year. The market expects that future interest rate cuts by the Federal Reserve may mainly be in the conventional 25 basis points, rather than the previously expected larger interest rate cuts. This change in expectations has led to a relative increase in the attractiveness of US dollar assets, driving the US Dollar Index higher.

3. Reversal of market position trading:

The market had previously over-bet on interest rate reduction trades. The current strengthening of the US Dollar is partly due to the reversal of these interest rate reduction position trades. In addition, other currencies are relatively weak. The economic performance and monetary policy expectations of other major economies such as the Eurozone are relatively weak, leading to a softening of currencies such as the Euro. There are signs that the interest rate differential between the Euro and the US Dollar may further expand, making the US Dollar more advantageous in comparison with other currencies, thus driving the US Dollar Index higher.IV. Middle East Conflicts Lead to Expectations of Rising Oil Prices: The upward movement in crude oil prices due to conflicts in the Middle East may be reflected in the U.S. CPI data. An increase in inflation expectations can affect the market's expectations for monetary policy, thereby influencing the trend of the U.S. dollar.

This Week's Key Economic Data to Guide Future Prospects

It is worth noting that this week will see the release of key economic data that will impact the U.S. Dollar Index and the global capital markets.

The September retail sales data to be announced on Thursday will be the main highlight. In addition, the manufacturing index of the New York Fed (Monday) and the manufacturing index of the Philadelphia Fed (Thursday) are also quite important. On Thursday, the September industrial production data will also be released, and on Friday, the data on building permits and new housing starts may attract some attention.

The release of these data will have a significant impact on the Federal Reserve's interest rate hike process. A stronger-than-expected retail sales report may not be positively received by the market, as it would further weaken the expectation of a significant rate cut. Analysts predict a sequential growth of 0.3% in September retail sales, compared to a growth of 0.1% last month.

If the Fed's rate cut is reduced, the U.S. Dollar Index will inevitably remain strong in a phased manner. However, many analysts do not favor the strength of the U.S. dollar.

Michael Hartnett, a strategy analyst at Bank of America, believes that the strong U.S. dollar is a thing of the past, and the dollar is now entering its fourth bear market in 50 years, with an expected decline of 20% in the U.S. Dollar Index. He believes that factors such as the surge in the U.S. budget deficit, the approaching debt ceiling, the rising probability of debt default, banking crises, "de-dollarization," and countries reducing their holdings of U.S. debt will continue to push the dollar down.