- DXY trades flat around 104.30 as PCE data offered no fresh impulse.
- February PCE rose 0.4%, keeping inflation fears in play ahead of the April tariff showdown.
- Resistance lies at 104.47, while 103.95 marks short-term support.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of currencies, is currently flat near 104.30 on Friday following the release of the Federal Reserve’s (Fed) preferred inflation metric — the Personal Consumption Expenditures (PCE) Price Index. The reading showed a mild uptick, helping the Greenback hold recent levels. However, the rally appears capped as safe-haven flows favor Gold, and technical signals remain bearish.
Daily digest market movers: US Dollar holds gains after PCE release, tariff jitters
- February’s core PCE rose 0.4%, above the expected 0.3%, reinforcing lingering inflation concerns in the United States.
- The headline PCE printed at 0.3%, matching expectations and offering no major surprises for traders.
- Despite stronger data, the US Dollar Index traded sideways as Gold surged beyond $3,080 to hit new record highs.
- US President Donald Trump’s recent tariff announcements, including a 25% auto levy effective April 2, rattled global trade sentiment.
- European Union officials warned of a “robust and timely” response if tariffs are implemented as planned next week.
- European Central Bank (ECB) Vice President Luis de Guindos said the tariffs will have temporary inflationary effects but lasting damage on Eurozone growth.
- Germany’s Chancellor Olaf Scholz criticized the US strategy, stating that isolationism would ultimately harm all involved economies.
- The DXY remains in a tight consolidation range as markets await clearer directional catalysts post-PCE.
- On Thursday, the US GDP was revised to 2.4% for Q4, slightly above the initial estimate, but had minimal impact on the Greenback.
- Jobless claims data showed improvement, with continuing claims falling to 1.856 million, supporting the labor market narrative.
- The reciprocal tariff deadline of April 2 is drawing near, raising concerns about a possible trade conflict with the EU.
Technical analysis
The US Dollar Index (DXY) continues to trade in consolidation near the 104.30 zone after a mild post-PCE reaction. While the Moving Average Convergence Divergence (MACD) flashes a buy signal, momentum indicators remain mixed. The Awesome Oscillator holds steady, suggesting subdued trend strength. The bearish backdrop is supported by the 20, 100, and 200-day Simple Moving Averages (SMA), as well as the 10- and 30-day Exponential Moving Averages (EMA), all pointing lower. Resistance is located at 104.118, 104.145, and 104.472, while immediate support rests at 103.951.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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