US Dollar (DXY) Index News: Traders Weigh Slower GDP Against Rising PCE

Economic Data Highlights

The focus on US economic health intensified with the latest GDP and inflation data releases. According to the Commerce Department, GDP growth slowed to a 1.6% annualized rate last quarter, missing expectations of a 2.4% expansion. More critically, the core personal consumption expenditures (PCE) price index, which the Fed closely monitors, increased by 3.7%—exceeding the forecasted 3.4%.

The Federal Reserve’s Reaction to Inflation

The unexpected rise in core PCE suggests that inflation pressures remain stubborn, likely influencing the Fed’s next moves. Originally, market participants anticipated rate cuts as early as September, but the strong inflation data has tempered these expectations. The futures market now shows a diminished probability of a September rate cut, with odds decreasing significantly from prior estimates.

Dollar and Global Currency Trends

Amid these developments, the dollar gained 0.1% to stand at 155.53 yen, even as the yen reached new multi-year lows against both the dollar and the euro. The market anticipates that the upcoming Bank of Japan policy meeting may not adopt a sufficiently hawkish tone to bolster the Japanese currency.

Market Outlook

With the latest inflation metrics suggesting a longer battle against high prices, the Federal Reserve may maintain a hawkish stance longer than initially expected, potentially strengthening the dollar. Traders are now eyeing the Fed’s future statements and policy moves, with a growing consensus that any rate cuts might not occur until November at the earliest, supporting a bullish outlook for the dollar in the coming months.