Q3 Meta earnings ahead: United States Dollar Index under mild pressure

101.68 is the US Dollar Index’s cautious trading level ahead of Meta’s Q3 results.
Over recent weeks, concerns about AI growth have weighed on both bond yields and the US Dollar.
October’s flash US S&P Global PMI release is another focus for investors this week.

101.68 is the US Dollar Index’s approximate trading level. During Wednesday’s European session, the index (DXY), which measures the Greenback against six major currencies, is marginally lower. It remains near last week’s almost three-week low of 101.50. Against its peers, the US Dollar is trading cautiously before Meta releases its Q3 earnings later in the day.

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

Meta’s results are expected to have a substantial impact on the US Dollar and United States (US) Treasury yields. Market experts have recently argued that US hyperscalers’ spending on Artificial Intelligence (AI) infrastructure has become a central driver of both.

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

7 Days: US Dollar Performance

Over the last 7 days, the US Dollar (USD) recorded its weakest performance against the New Zealand Dollar. The table below sets out its percentage changes against the major currencies listed.

	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%

Each cell in the heat map records the percentage change between two major currencies. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the US Dollar on the left and following that row across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote).

Following the recent correction, MUFG analysts described US financial markets as “a major beneficiary of strong foreign investor demand driven by AI-related optimism.” They pointed to foreign investors having purchased “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.” Their warning, however, is that “this dynamic also leaves the USD more exposed to a reversal if sentiment towards AI deteriorates.”

Meta’s guidance on planned AI expenditure will be closely scrutinised by financial markets. INDMoney puts Meta’s 2026 capital expenditure outlook 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 remaining spending requirement is straightforward to determine.

Any indication in Meta’s guidance commentary that AI infrastructure spending is slowing would put pressure on the US Dollar’s outlook.

Friday brings the preliminary US S&P Global PMI figures for October, which investors are awaiting on the economic calendar. Expectations are for another expansion in overall business activity, though at a moderate pace.

101.67: US Dollar Index Technical Outlook

At 101.67 on the daily chart, the Dollar Index Spot remains marginally above its 20-day Exponential Moving Average (EMA) of 101.66. Support from this dynamic floor leaves the short-term bias mildly bullish. Slightly above neutral at 53.39, the Relative Strength Index (RSI) points to steady upward momentum without overextension as the index consolidates close to recent highs.

The 20-day EMA at 101.66 provides the first downside support. A sustained move beneath it would undermine the constructive outlook and create scope for a deeper retreat. The current dataset offers no nearby technical resistance levels, so traders may turn to psychological levels and earlier swing highs above the market to identify potential supply zones. The setup continues to favour buying on dips while the index stays above the 101.66 area.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

US Dollar: Key Questions

US Dollar: Currency and Global Role

As the official currency of the United States of America, the US Dollar (USD) also circulates alongside local banknotes as the ‘de facto’ currency in a significant number of other countries. Data from 2022 show that it accounts for over 88% of global foreign exchange turnover, equivalent to average daily transactions of $6.6 trillion, making it the world’s most actively traded currency. After the Second World War, the USD replaced the British Pound as the global reserve currency. Gold backed the US Dollar for much of its history, until the Bretton Woods Agreement in 1971 brought the Gold Standard to an end.

Federal Reserve Policy and the US Dollar

Monetary policy set by the Federal Reserve (Fed) is the single largest influence on the US Dollar’s value. The Fed’s dual mandate combines price stability, through controlling inflation, with the promotion of full employment. Interest rate adjustments are its main instrument for meeting those objectives. If prices climb too rapidly and inflation exceeds the Fed’s 2% target, it raises rates, supporting the USD. Conversely, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut rates, weighing on the Greenback.

Quantitative Easing: Implications for the US Dollar

In exceptional circumstances, the Federal Reserve can create additional Dollars through quantitative easing (QE). This process substantially expands the flow of credit through a stalled financial system. As an unconventional policy measure, QE addresses a credit shortage caused by banks refusing to lend to one another because they fear counterparty default. It is a last resort when interest rate cuts alone are unlikely to deliver the required outcome. During the Great Financial Crisis in 2008, QE was the Fed’s preferred response to the credit crunch. Under the programme, the Fed prints additional Dollars to purchase US government bonds, mainly from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening: Implications for the US Dollar

The reverse of quantitative easing is quantitative tightening (QT). Under QT, the Federal Reserve ceases bond purchases from financial institutions and allows its existing bonds to mature without reinvesting the principal in new purchases. This generally supports the US Dollar.