US Dollar Forecast: DXY Eases After PCE Print Offers No Fresh Hawkish Fuel

Dollar Closes Higher for Second Straight Week as US Resilience Dulls Fed Cut Hopes

The US dollar edged lower Friday but still managed to notch a second consecutive weekly gain against major currencies, with economic data continuing to reflect a resilient American economy. The tone from recent Fed officials and robust spending numbers have helped stall rate cut bets, offering support to the dollar and keeping it near key technical levels.

Technically, DXY settled just below a key retracement zone at 98.238 to 98.714, but above the 50-day moving average at 98.020. Trader reaction to the moving average will determine the near-term tone and trend.

Stronger US Data Cools Rate Cut Expectations

August data confirmed that consumer spending rose 0.6%, slightly above forecasts, while the Fed’s preferred inflation gauge—the core PCE—rose 0.2% month-over-month and 2.9% annually. Both readings were in line with expectations, but continued signs of economic strength are giving the Fed less room to ease.

Third-quarter GDP was revised higher to 3.8% annualized growth, beating estimates of 3.3%, reinforcing the narrative of persistent strength across consumer and business sectors. Weekly jobless claims also surprised to the downside, falling to 218,000 versus expectations of 235,000, adding to the labor market’s staying power.

Dollar Finds Ground Despite Friday Dip

The DXY settled the week lower by 0.27% at 98.182, yet booked a second weekly gain. USD/JPY closed at 149.47—still hovering near its highest since early August and marking its fifth straight week of gains. The dollar also firmed against the Swiss franc, closing at 0.7982 for its first weekly win after six consecutive losses. EUR/USD, however, climbed 0.29% Friday to $1.17002 but posted its first weekly drop after three straight gains.

Fed Messaging Sends Mixed Signals

Fed commentary added some complexity. Richmond Fed President Thomas Barkin said risks to inflation or unemployment remain limited, suggesting the Fed could keep a balanced stance. Conversely, Fed Vice Chair for Supervision Michelle Bowman noted that while inflation is nearing target, decisive cuts may be needed soon to protect jobs.

Market pricing still reflects a high probability—around 89.8%—of a 25-basis-point cut at the next Fed meeting, down slightly from nearly 92% the previous week. That modest pullback in expectations helped keep the dollar buoyed.

Yields Reflect Rate Uncertainty

In Treasuries, the 2-year yield—often most sensitive to rate expectations—fell about 2 basis points to 3.645%, while the 10-year yield held near 4.18%. The soft move in yields matches the market’s current uncertainty over timing and pace of cuts, especially with core inflation still sitting above the Fed’s 2% goal.

Market Forecast: DXY Buoyed by Fed Patience, Eyes Jobs Data

With core inflation still sticky and GDP growth exceeding expectations, the Fed appears in no rush to accelerate cuts. That’s keeping the DXY supported in the short term, especially with hedging flows and yield spreads still leaning in the dollar’s favor.

Traders will be watching next week’s jobs data closely—it could be pivotal. Unless there’s a significant cooling in labor markets, dollar dips may continue to be bought on any weakness.

More Information in our Economic Calendar.