- The US Dollar trades flat to a touch softer in the PCE aftermath.
- Markets are looking for direction with PCE in line of expectations.
- The US Dollar Index trades around 104.00, unable to move away from any direction.
Following the release of the US Personal Consumption Expenditures (PCE) Price Index data, the US Dollar (USD) is maintaining a tight range around 104.00. Despite fluctuations, it seems reluctant to break away from this level in either direction. The market appears to be adopting a wait-and-see approach, possibly looking toward March for more decisive signals from central bank rate decisions to provide clarity on the direction of the Dollar Index (DXY).
Looking at upcoming economic events, there’s lighter data on the horizon, including the February Kansas Fed Manufacturing Activity report. Additionally, for those willing to stay informed late into the day, there are anticipated comments from three to four US Federal Reserve speakers on the current monetary policy. Christopher Waller, the Head of the St Louis Fed, has already voiced support for three rate cuts this year in recent overnight remarks.
Daily digest market movers: Easing
At 13:30 GMT, two key economic indicators were unveiled: Jobless Claims for the current week exhibited a rise from 202,000 to 215,000, with Continuing Jobless Claims increasing from 1.860 million to 1.905 million.
Simultaneously, the Personal Consumption Expenditures (PCE) Price Index for January delivered the following results: The monthly Headline PCE met expectations by accelerating from 0.2% to 0.3%, while the yearly reading decreased from 2.6% to 2.4.
For the core reading, excluding the volatile categories of food and energy, the monthly PCE outpaced predictions by increasing from 0.2% to 0.4%. The yearly core PCE, in line with expectations, decreased from 2.9% to 2.8%.
Additionally, Personal Income experienced a notable surge from 0.3% to 1.0%, while Personal Spending decelerated significantly from 0.7% to 0.2%.
Moving forward in the day:
- At 14:45 GMT, the Chicago Purchasing Managers Index for February contracted from 46 to 44.
- At 15:00 GMT, Pending Home Sales contracted from 5.7% to -4.9%, indicating a contraction in the segment.
- The final economic release for Thursday is the Kansas City Fed Manufacturing Activity Index for February, with no specific forecast after the previous -17 reading.
Notably, several US Federal Reserve speakers are scheduled:
- Around 15:50 GMT, comments from Raphael Bostic, Head of the Atlanta Fed.
- At approximately 16:00 GMT, Austan Goolsbee, Head of the Chicago Fed, will speak.
- Around 18:15 GMT, Loretta Mester, Head of the Cleveland Fed, will take the stage.
- Overnight, at 01:10 GMT on Friday, John Williams from the New York Fed will share insights.
Market dynamics reflect a positive response to the in-line PCE report, mitigating concerns from the previous Consumer Price Index (CPI) report. All US equity futures are in positive territory ahead of the opening bell, and European equities are seeing around 0.50% intraday gains.
According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting stand at 97.5%, with a mere 2.5% chance of a rate cut. The benchmark 10-year US Treasury Note is trading around 4.22%, near the session’s low.
US Dollar Index Technical Analysis: Yawn, DXY unable to move away
The US Dollar Index (DXY) is pushing back its anticipated challenges for another week, remaining relatively unchanged even after the recent release of PCE data failed to significantly impact the Greenback. The report closely aligned with expectations, which had been heightened following a hotter Consumer Price Index (CPI) reading two weeks ago and unexpected upticks in PCE data during the US Gross Domestic Product (GDP) release on Wednesday. Traders are exercising caution, refraining from committing to a specific direction and possibly awaiting cues from both the European Central Bank and the US Federal Reserve meetings scheduled for March before determining a decisive course for the DXY.
On the upside, the initial barrier remains the 100-day Simple Moving Average (SMA) near 103.98. If the US Dollar manages to surpass 104.60, the next significant level to monitor is 105.12. Beyond that, attention turns to 105.88, marking the high from November 2023. Ultimately, the 107.20 level, representing the high of 2023, could come back into consideration.
Looking downward, the 200-day Simple Moving Average at 103.74, although breached twice recently, still presents a somewhat fragile support. While a minor retracement to this level seems plausible, the 200-day SMA is expected to offer resistance. However, if it succumbs to persistent selling pressure, a decline towards 103.16 (the 55-day SMA) and a test of the 103.00 level may ensue.
