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US Dollar Index Nears 103.00 on Hot PPI Data, June Rate Cut in Question

The US Dollar (USD) sees renewed strength after hotter-than-expected US inflation data, including Retail Sales and the key Producer Price Index (PPI). Surging inflation figures cast doubt on the likelihood of an initial Federal Reserve rate cut in June.

Key Factors:

  • Inflation Surprise: Unexpectedly high PPI data suggests persistent inflation, potentially delaying Fed rate cuts.
  • Focus on Fed: Markets await Friday’s Industrial Production and University of Michigan data for further insights into the rate outlook.

Technical Outlook:

  • DXY Upside Potential: The index flirts with a break above 103.00. A decisive break could lead to tests of the 55-day SMA (103.38) and the 100/200-day SMAs near 103.68/103.70. Further gains could target 104.96.
  • Downside Risks: Failure to clear the SMAs could lead to a pullback towards 102.00, with a break opening the door for a deeper decline to 100.61 (2023 low).