United States Dollar Index under mild pressure as Meta Q3 earnings approach

Caution keeps the US Dollar Index near 101.68 as markets await Meta’s Q3 earnings.
Over the past few weeks, worries about AI growth have weighed on both the US Dollar and bond yields.
Also on investors’ radar this week are the flash US S&P Global PMI readings for October.

Cautious sentiment surrounds the US Dollar against its peers as markets await Meta’s Q3 earnings later in the day. During Wednesday’s European session, the US Dollar Index (DXY) is slightly lower at around 101.68. The index, which tracks the Greenback against six major currencies, remains near the almost three-week low of 101.50 reached last week.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Meta’s results are expected to have a significant bearing on the US Dollar and United States (US) Treasury yields. Market experts have recently argued that spending by US hyperscalers on Artificial Intelligence (AI) infrastructure has emerged as a key driver of both.

Concerns about AI growth have pulled US bond yields and the US Dollar back from their recent peaks.

How Has The US Dollar Performed Over The Last 7 Days?

Against the major currencies listed below, the US Dollar (USD) recorded the percentage changes shown over the last 7 days. Its weakest performance was against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.29%	-1.08%	-0.25%	-1.22%	-0.73%	-1.36%	-1.01%
EUR	0.29%		-0.79%	0.04%	-0.94%	-0.43%	-1.07%	-0.70%
GBP	1.08%	0.79%		0.85%	-0.12%	0.41%	-0.28%	0.06%
JPY	0.25%	-0.04%	-0.85%		-0.98%	-0.47%	-1.09%	-0.75%
CAD	1.22%	0.94%	0.12%	0.98%		0.51%	-0.08%	0.20%
AUD	0.73%	0.43%	-0.41%	0.47%	-0.51%		-0.68%	-0.33%
NZD	1.36%	1.07%	0.28%	1.09%	0.08%	0.68%		0.35%
CHF	1.01%	0.70%	-0.06%	0.75%	-0.20%	0.33%	-0.35%

Percentage movements between the major currencies are displayed in this heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the US Dollar on the left and following its row across to the Japanese Yen, for instance, gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.

Following the recent correction, MUFG analysts described US financial markets as “a major beneficiary of strong foreign investor demand driven by AI-related optimism.” Pointing to foreign investment flows, they said investors bought “USD942 billion of US equities in the twelve months to July, while purchases of US corporate bonds increased sharply to USD452 billion over the same period.” In MUFG’s view, these “sizeable inflows highlight how the USD has become increasingly tied to investors’ search for higher returns in US financial markets, rather than benefiting from its traditional safe-haven status.” The analysts nevertheless warned that “this dynamic also leaves the USD more exposed to a reversal if sentiment towards AI deteriorates.”

Meta’s guidance on planned AI-related expenditure will be closely scrutinised by financial markets. INDMoney puts Meta’s capital expenditure outlook for 2026 at $130 billion to $145 billion. The company’s presentation reported first-half spending of $50.918 billion. If Q3 expenditure meets the $41.68 billion estimate, the amount still required becomes straightforward to determine.

The outlook for the US Dollar would come under pressure if Meta’s guidance commentary points to slower spending on AI infrastructure.

Turning to economic releases, investors are waiting for October’s preliminary US S&P Global PMI figures, due on Friday. Overall business activity is expected to have expanded once more, though at a moderate pace.

Can The US Dollar Index Hold Its Technical Support?

A mildly bullish near-term bias persists on the daily chart, with the Dollar Index Spot at 101.67, just above its 20-day Exponential Moving Average (EMA) of 101.66. This dynamic support continues to underpin price action. At 53.39, the Relative Strength Index (RSI) is marginally above neutral, suggesting steady upside momentum without signs of overextension as the index consolidates close to recent highs.

The 20-day EMA at 101.66 provides the first downside support. A sustained move below it would undermine the positive tone and leave room for a deeper retreat. As the current dataset offers no nearby technical resistance levels, traders may turn to psychological levels and earlier swing highs above the market to identify potential supply zones. The existing setup nevertheless favours buying on dips while the index stays above the 101.66 area.

(An AI tool assisted in preparing this article’s technical analysis. Learn more.)

US Dollar: Common Questions

What role does the US Dollar play?

As the official currency of the United States of America, the US Dollar (USD) also serves as the ‘de facto’ currency in a significant number of other countries, circulating alongside their local banknotes. No other currency is traded more widely: according to 2022 data, it accounts for over 88% of global foreign exchange turnover, equivalent to average daily transactions of $6.6 trillion. After the Second World War, the USD replaced the British Pound as the world’s reserve currency. Gold backed the US Dollar for most of its history, until the Bretton Woods Agreement in 1971 brought the Gold Standard to an end.

How does Federal Reserve policy affect the US Dollar?

Monetary policy set by the Federal Reserve (Fed) is the single most influential factor in determining the US Dollar’s value. Achieving price stability by controlling inflation and promoting full employment are the Fed’s two mandates. Adjustments to interest rates are its main means of pursuing these goals. If prices climb too rapidly and inflation exceeds the Fed’s 2% target, the central bank raises rates, supporting the USD. Conversely, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut interest rates, putting pressure on the Greenback.

How does Quantitative Easing affect the US Dollar?

When circumstances are extreme, the Federal Reserve may print additional Dollars and introduce quantitative easing (QE). Through QE, the Fed sharply expands credit flows in a financial system that has become blocked. This unconventional policy is deployed when credit dries up as banks, fearing counterparty defaults, refuse to lend to one another. It is a last-resort measure when interest rate cuts alone are unlikely to deliver the required outcome. During the Great Financial Crisis in 2008, the Fed chose QE to tackle the credit crunch. The process involves creating more Dollars to purchase US government bonds, mainly from financial institutions. The US Dollar typically weakens as a result of QE.

How does Quantitative Tightening affect the US Dollar?

In the opposite process, known as quantitative tightening (QT), the Federal Reserve halts bond purchases from financial institutions. It also refrains from reinvesting the principal received when bonds in its holdings mature into fresh purchases. This generally supports the US Dollar.