US Dollar (DXY) Index News: Greenback Strengthens after Fed Member Signals No Immediate Rate Cuts

James Hyerczyk
Updated: Jun 25, 2024, 14:04 GMT+00:00

Key Points:

  • Traders brace for key economic and inflation reports this week, boosting the U.S. Dollar Index.
  • Federal Reserve officials suggest no immediate rate cuts, emphasizing the need to combat inflation.
  • Gold prices decline as a stronger dollar reduces demand for dollar-denominated bullion.
US Dollar (DXY) Index News:

In this article:

Dollar Edges Higher Ahead of Key Economic Reports

The U.S. Dollar Index (DXY) is experiencing modest gains as traders brace for key economic and inflation reports due later this week. Despite the lack of major news driving today’s price action, a somewhat hawkish comment from a Federal Reserve member has contributed to the dollar’s strength, putting pressure on gold prices.

At 13:39 GMT, the U.S. Dollar Index is trading 105.666, up 0.184 or +0.17%.

Treasury Yields and Inflation Insights

U.S. Treasury yields remained stable on Tuesday as investors awaited critical inflation data scheduled for release on Friday. This week’s economic data includes consumer confidence insights, house price figures, durable goods orders, and the personal consumption expenditures (PCE) price index for May—the Federal Reserve’s preferred inflation gauge.

Market Expectations on Fed’s Rate Cuts

Investors are also closely monitoring statements from Federal Reserve officials to glean insights into the timing of potential interest rate cuts. While a summer rate cut seems unlikely, the market is pricing in a 67.7% probability of a rate cut in September, according to the CME Group’s FedWatch tool.

Daily 10-Year Treasury Note Yield

Fed Officials’ Comments

Federal Reserve Governor Michelle Bowman indicated on Tuesday that the central bank is not yet ready to lower rates and remains open to further hikes if inflation stays high. Bowman stated, “Should the incoming data indicate that inflation is moving sustainably toward our 2 percent goal, it will eventually become appropriate to gradually lower the federal funds rate… However, we are still not yet at the point where it is appropriate to lower the policy rate.”

Bowman also emphasized the presence of several risks to achieving the Fed’s 2% inflation target, expressing willingness to raise the target range for the federal funds rate if necessary. Similarly, San Francisco Federal Reserve President Mary Daly noted that while progress has been made in reducing inflation, there is more work to do, reinforcing the Fed’s commitment to its monetary policy objectives.

Daily Gold (XAU/USD)

Impact on Gold Prices

Gold prices fell on Tuesday as investors anticipated the upcoming U.S. inflation data, seeking clarity on the timing of future rate cuts. The stronger greenback also dampened demand for dollar-denominated bullion.

Market Forecast: Bullish for USD

Given the current sentiment and the anticipation of crucial economic data, the outlook for the U.S. Dollar Index remains bullish. Traders are positioning themselves for potential rate cuts later in the year, but the immediate focus on inflation data and Fed communications suggests continued strength for the dollar in the short term.

Technical Analysis

Daily US Dollar Index (DXY)

The U.S. Dollar Index (DXY) is edging higher on Tuesday, however, gains are being capped by last week’s high at 105.915. Traders don’t have much of an incentive to take out this level ahead of Thursday’s GDP report and Friday’s Core PCE data.

The high at 105.915 is resistance, but it’s also the gateway to the April top at 106.517. On the downside, the index appears to be well-supported by the 50-day moving average at 105.177.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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