- DXY rallies further following Federal Reserve's decision, trades above 105.00.
- US releases soft PPI figures from May and higher weekly Initial Jobless Claims.
- US Treasury yields continue to move down and may limit the upside.
On Thursday, the US Dollar Index (DXY) continued its positive momentum, extending its recovery into Thursday's session above 105.00. This followed Wednesday's Federal Reserve (Fed) decision and as markets digested fresh Producer Price Index (PPI) figures from May and weekly Initial Jobless Claims, which showcased weaker than anticipated inflation and higher unemployment benefit requests.
The Fed kept its economic activity revisions unchanged while upgrading the Personal Consumption Expenditures (PCE) forecasts. The US economy is currently showcasing mixed signs with preliminary evidence indicating softening inflation but with a resilient labor market, which seems to have made Fed officials project fewer rate cuts in 2024.
Daily digest market movers: DXY reacts to Fed decision, PPI data
- Federal Open Market Committee (FOMC) dot plot update on Wednesday shows just one rate cut for 2024 as the median outcome, down from the three rate cut expectation last March by Fed Officials.
- This adjusted the market's expectations, which priced in between one or two cuts this year, indicating a longer timeline for potential rate cuts.
- Producer Price Index (PPI) for final demand rose 2.2% on a yearly basis in May, below the market expectation of 2.5%.
- Annual core PPI rose by 2.3%, also below market expectations.
- Weekly Jobless Claims showed 242K in the week ending June 8, higher than initial estimates of 225K and last week's print of 229K.
DXY technical analysis: Bulls maintain control and recover SMAs
Following Wednesday’s session, indicators recovered to stand in positive terrain. The Relative Strength Index (RSI) is now above 50 midline, and the Moving Average Convergence Divergence (MACD) is printing green bars. In addition, the Index is now trending above its 20, 100, and 200-day Simple Moving Averages (SMA). This extends the bullish outlook for the US Dollar, following Wednesday’s sharp decline.
