The US Dollar Index (DXY) experienced a decline on Thursday after a brief recovery on Wednesday. This reversal in fortune can be attributed to disappointing US Gross Domestic Product (GDP) revisions and an increase in Jobless Claims, both of which have had a negative impact on the USD. While the labor market has shown some signs of weakening, the likelihood of interest rate cuts in June and July remains low. However, market participants are eagerly awaiting the release of the Personal Consumption Expenditure (PCE) figures on Friday, as they could potentially influence the Federal Reserve’s future monetary policy decisions.
Investors are expressing concerns over the softening of Consumer Spending as indicated by the revised GDP growth of 1.3%. The rise in Initial Jobless Claims from 216K to 219K has also added to the uncertainty in the market. Despite these developments, the probability of rate cuts in the coming months remains relatively low, with the odds standing at around 50% for September. The PCE figures scheduled to be released on Friday are expected to provide further insights into the state of the US economy and could shape the Fed’s future actions.
The DXY’s technical analysis reveals a struggle for the US Dollar amid negative economic indicators. The Relative Strength Index (RSI) is signaling increased selling pressure and a shift in momentum, with readings below the 50-level. Additionally, the index has fallen below the 20-day Simple Moving Average (SMA), while the Moving Average Convergence Divergence (MACD) is showing red bars, indicating a return of bearish sentiment. These technical readings point towards further weakness for the USD in the near term.
Overall, the recent revisions in US GDP figures and the increase in Jobless Claims have dampened the outlook for the US Dollar. While the market remains cautious about the state of the economy, the anticipation of the upcoming PCE figures on Friday adds an element of uncertainty. Investors will be closely monitoring the data releases and the subsequent reaction of the Federal Reserve in order to gauge the direction of the USD in the coming weeks.
