The US Dollar Index (DXY) defied expectations on Thursday, extending its recent rebound above 105.00. This resilience came despite the release of softer-than-expected Producer Price Index (PPI) data and higher-than-anticipated Initial Jobless Claims. Wednesday’s Federal Reserve (Fed) decision and updated economic projections further fueled the DXY’s upward trajectory.
While the US economy is showing mixed signals, with softening inflation but a still-robust labor market, the Fed’s revised forecasts now project fewer rate cuts in 2024, contributing to the Dollar’s strength.
Market Drivers: Fed Projections and Economic Data
- FOMC Dot Plot: The latest dot plot revealed a median expectation of just one rate cut for 2024, a significant shift from the previous forecast of three cuts, signaling a potentially longer timeline for monetary policy easing.
- PPI Data: The Producer Price Index (PPI) for May came in below expectations, with both headline and core PPI figures falling short of forecasts, indicating subdued inflationary pressures.
- Jobless Claims: Weekly Initial Jobless Claims rose more than anticipated, hinting at potential softness in the labor market.
DXY Technical Analysis: Bullish Momentum Resumes
The DXY’s technical indicators have rebounded into positive territory, with the Relative Strength Index (RSI) moving above 50 and the Moving Average Convergence Divergence (MACD) printing green bars. Additionally, the index is now trading above its 20, 100, and 200-day Simple Moving Averages (SMA), confirming a renewed bullish outlook for the US Dollar following Wednesday’s brief dip.
