US Dollar (DXY) Index News: Traders Weigh Slower GDP Against Rising PCE

U.S. Dollar Stabilizes Amid Inflation Concerns

The U.S. dollar showed modest movements after a hotter-than-expected inflation report for the first quarter, suggesting that the Federal Reserve might delay easing its monetary policy. Despite a slight dip in the dollar index, which tracks the currency against six major counterparts, the dollar saw a slight rise against the yen.

At 17:37 GMT, the U.S. Dollar Index is trading 105.548, down 0.274 or -0.26%.

Economic Data Highlights

The focus on U.S. economic health intensified with the latest GDP and inflation data releases. According to the Commerce Department, GDP growth slowed to a 1.6% annualized rate last quarter, missing expectations of a 2.4% expansion. More critically, the core personal consumption expenditures (PCE) price index, which the Fed closely monitors, increased by 3.7%—exceeding the forecasted 3.4%.

Federal Reserve’s Reaction to Inflation

The unexpected rise in core PCE suggests that inflation pressures remain stubborn, likely influencing the Fed’s next moves. Originally, market participants anticipated rate cuts as early as September, but the strong inflation data has tempered these expectations. The futures market now shows a diminished probability of a September rate cut, with odds decreasing significantly from prior estimates.

Dollar and Global Currency Trends

Amid these developments, the dollar gained 0.1% to stand at 155.53 yen, even as the yen reached new multi-year lows against both the dollar and the euro. The market anticipates that the upcoming Bank of Japan policy meeting may not adopt a sufficiently hawkish tone to bolster the Japanese currency.

Market Outlook

With the latest inflation metrics suggesting a longer battle against high prices, the Federal Reserve may maintain a hawkish stance longer than initially expected, potentially strengthening the dollar. Traders are now eyeing the Fed’s future statements and policy moves, with a growing consensus that any rate cuts might not occur until November at the earliest, supporting a bullish outlook for the dollar in the coming months.

Technical Analysis

The U.S. Dollar Index is edging lower at the mid-session as traders square positions ahead of Friday’s PCE inflation report. Surprisingly, the index is lower despite higher than expected inflation data inside today’s GDP report. The price action suggests investors were geared more toward the weaker-than-expected growth in the economy.

The short-term trend is now trending lower, however, the intermediate and long-term uptrends remain intact.

Although the market is straddling minor support at 105.628, the daily chart indicates there is plenty of room to the downside with the 50-day moving average coming in at 104.353 and the 200-day moving average at 104.049.