The U.S Dollar Index (DXY) surged 0.47% today as traders got the first opportunity to react to Friday’s inflation numbers.
Inflation Talk
The 0.3% rise in the Core PCE price index came in line with expectations. Subsequently, Fed Chair Jerome Powell noted that the figure was in line with what the central bank wants to see. Today, the PMI manufacturing index came in at 51.9 versus the 52.2 mark for February. The number indicates that the U.S. economy continued to expand at a healthy pace during the first quarter.
Rate Cut on the Horizon
Traders are largely anticipating a rate cut in June. The Fed’s stance of being in no hurry, however, is more likely to keep the dollar buoyed in the coming months. The market has revised its expectations from six rate cuts to approximately three for the year. Any softening in labor trends could further bolster the dollar in the coming months.
Diverging Trends
While the Euro and the Sterling are experiencing fluctuations, the Yen continues to trade firmly in weak territory. The Japanese currency is hovering at its lowest levels against the dollar in more than three decades. This decline has also sparked discussions about a potential intervention from the Bank of Japan (BOJ). Meanwhile, the Turkish Lira is also trading weakly following a surprising setback for the country’s ruling party in local elections.
The DXY is currently hovering around key levels last seen in February. A break above this threshold could signal a rally towards the 105.6 mark.
Source: TradingView
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