- January’s Personal Consumption Expenditures data aligned with expectations.
- President Trump confirms that tariffs on Canada, Mexico, and China will take effect on March 4.
- DXY is set to record a 0.60% weekly gain, holding onto Thursday’s rally.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of six major currencies, remains firm above 107.00 on Friday after January’s Personal Consumption Expenditures (PCE) inflation data came in line with forecasts, easing concerns over unexpected inflation spikes.
The Greenback retains its recent gains as President Donald Trump reaffirms that tariffs on Canada, Mexico, and China will be implemented on March 4. Meanwhile, risk sentiment improves with US equity markets erasing earlier losses and moving higher.
Daily digest market movers: US Dollar holds firm after PCE report
- DXY hovers around 107.30, aiming to sustain its bullish momentum heading into the weekend.
- Trump administration confirms that tariffs on Canada and Mexico will take effect on March 4, with China facing an additional 10% levy.
- January’s PCE inflation data met expectations with monthly headline PCE at 0.3%, unchanged from the prior reading.
- Core PCE at 0.3%, ticking up from December’s 0.2%, while the annual headline PCE at 2.6%, slightly exceeding expectations but in line with December’s 2.6%. Core PCE arrived at 2.6%, easing from a revised 2.9% in December.
- In addition, the Chicago Purchasing Managers Index (PMI) jumps to 45.5, surpassing the 40.6 consensus and improving from January’s 39.5.
- Regarding expectations, the CME FedWatch Tool indicates a 30% probability that the Federal Reserve will keep rates unchanged at 4.25%-4.50% in June, with the rest pointing to potential cuts.
- On the foreign policy front, tensions rise between US President Donald Trump and Ukrainian leader Volodymyr Zelenskyy over peace deal negotiations.Zelenskyy pushed for US promises on defense, while Trump accused him of being “disrespectful” in a heated public exchange.
DXY technical outlook: Holding steady with weekly gains
The US Dollar Index remains above 107.00, consolidating its 0.60% weekly gain after rebounding above the 100-day Simple Moving Average (SMA) at 106.60. Technical indicators, including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), signal mild recovery, but further bullish momentum is needed. Resistance is seen at 107.50, while support lies at 106.60 and 106.00, acting as key levels if selling pressure emerges.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD trims losses and approaches 1.0800 after US data
The US Dollar renewed its bullish momentum on Tuesday, pressuring EUR/USD and keeping the pair under the critical 1.0800 threshold following the release of US ISM Manufacturing PMI and JOLTS readings.
GBP/USD meets support around 1.2880, USD remains strong
After bottoming out around the 1.2880 region, GBP/USD now manages to attempt a bounce and flirt with the 1.2900 zone in the wake of weaker-than-expected US data releases.
Gold nears $3,100 as fears receded
Gold is easing from its fresh record high near $3,150 but remains well supported above the $3,100 mark. A generalised pullback in US yields is underpinning the yellow metal, as traders stay on the sidelines awaiting clarity on upcoming US tariff announcements.
Dogecoin bulls defend lifeline support as risk-off sentiment continues
Dogecoin trades at $0.1731 during early American hours on Tuesday after recovering from Monday’s support at $0.16. The leading meme coin faced negative headwinds early in the week as investors reacted to comments by Tesla CEO Elon Musk, who heads the special Department of Government Efficiency (D.O.G.E.) in the US.
Is the US economy headed for a recession?
Leading economists say a recession is more likely than originally expected. With new tariffs set to be launched on April 2, investors and economists are growing more concerned about an economic slowdown or recession.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.