US Dollar Holds Ground After Fresh PPI Readings and Jobless Claims

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The US Dollar Index (DXY) continued its positive momentum on Thursday, trading above the 105.00 mark, following the Federal Reserve’s recent decisions and the release of fresh economic data. The DXY extended its recovery as markets digested new Producer Price Index (PPI) figures from May and weekly Initial Jobless Claims, which indicated weaker-than-anticipated inflation and higher unemployment benefit requests.

The Federal Reserve maintained its economic activity projections while upgrading its Personal Consumption Expenditures (PCE) forecasts. Current mixed signals from the US economy, including preliminary evidence of softening inflation coupled with a resilient labor market, have led Fed officials to project fewer rate cuts in 2024.

The Federal Open Market Committee (FOMC) updated its dot plot on Wednesday, revealing a median expectation of just one rate cut in 2024, down from the three cuts previously anticipated in March. This adjustment has influenced market expectations, suggesting a more extended timeline for potential rate reductions.

The PPI for final demand rose by 2.2% on an annual basis in May, falling short of market expectations of 2.5%. The annual core PPI increased by 2.3%, also below forecasts. Additionally, weekly Initial Jobless Claims reached 242,000 for the week ending June 8, higher than the anticipated 225,000 and the previous week’s figure of 229,000.

Following Wednesday’s session, technical indicators for the DXY have recovered, positioning themselves in positive territory. The Relative Strength Index (RSI) is now above the 50 midline, and the Moving Average Convergence Divergence (MACD) is showing green bars. The Index is also trending above its 20, 100, and 200-day Simple Moving Averages (SMA), reinforcing the bullish outlook for the US Dollar after Wednesday’s sharp decline.

The US Dollar’s resilience above 105.00 highlights investor confidence in the currency amidst mixed economic signals. While the PPI data points to subdued inflationary pressures, the rise in jobless claims suggests potential vulnerabilities in the labor market. These factors, combined with the Fed’s cautious approach to future rate cuts, indicate a complex economic landscape ahead.

Market participants will continue to monitor these developments closely, particularly any new data releases or changes in Fed policy, which could further influence the trajectory of the US Dollar.

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