- The index loses momentum near the 102.50 region.
- US PCE showed further loss of traction in February.
- Final Consumer Sentiment comes next in the docket.
The greenback, in terms of the USD Index (DXY), gives away part of the earlier advance to daily highs in the 102.50/55 band.
USD Index trims gains post-PCE
Following the earlier move to daily peaks near 102.50, the index now comes under some selling pressure after the downtrend in US inflation figures was somewhat “confirmed” by the PCE results.
Indeed, prices tracked by the headline PCE rose 5.0% in the year to February and 4.6% when it comes to the Core PCE. Further data releases showed Personal Income rose 0.3% MoM and Personal Spending increased 0.2% vs. the previous month.
Later in the session, the final readings of the Michigan Consumer Sentiment for the month of March are due.
From the Fed’s backyard, Boston Fed S.Collins was again on the wires after suggesting that other sectors should respond to the tighter monetary conditions in the next quarters at the time when she noted that data indicating a slowing economy is welcomed by the Fed.
In the wake of the PCE release, the probability of a rate hike by the Fed at the May event is slightly favoured vs. a “no hike” according to CME Group’s FedWatch Tool.
What to look for around USD
The index rebounds markedly on the back of some hawkish comments from Fed rate setters as of late, although the persistent disinflation – this time via lower PCE figures – could lend support to a potential pivot in May and thus keep the buck under pressure.
So far, speculation of a potential impasse by the Fed in the short-term horizon should keep weighing on the dollar, although the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.
Key events in the US this week: PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).
Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
USD Index relevant levels
Now, the index is advancing 0.21% at 102.38 and faces the next resistance level at 103.36 (55-day SMA) followed by 104.05 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).
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 struggles to hold above 1.0400 as mood sours
EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. In the absence of high-tier data releases, the cautious risk mood helps the US Dollar hold its ground and forces the pair to stretch lower.
GBP/USD declines below 1.2550 on renewed USD strength
GBP/USD loses its traction and trades below 1.2550 in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as trading conditions remain thin heading into the Christmas holiday.
Gold drops to $2,620 area as US bond yields edge higher
Gold struggles to build on Friday's gains and trades modestly lower on the day near $2,620. The benchmark 10-year US Treasury bond yield edges slightly higher above 4.5%, making it difficult for XAU/USD to gather bullish momentum.
Bitcoin fails to recover as Metaplanet buys the dip
Bitcoin hovers around $95,000 on Monday after losing the progress made during Friday’s relief rally. The largest cryptocurrency hit a new all-time high at $108,353 on Tuesday but this was followed by a steep correction after the US Fed signaled fewer interest-rate cuts than previously anticipated for 2025.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.