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US Dollar Index holds positive ground around the 104.00 mark, eyes on US GDP data

  • The US Dollar Index (DXY) attracts some buyers near 103.95 in Wednesday’s early European session. 
  • Several Fed officials suggested a cautious and slow approach to the policy stance, which lends some support to the USD. 
  • US Durable Goods Orders fell 6.1% in January from a 0.3% decline in December, weaker than estimated. 
  • US GDP growth numbers for Q4 will be the highlight on Wednesday. 

The US Dollar Index (DXY) rebounds to nearly the 104.00 mark during the early European session on Wednesday. Investors await the US Gross Domestic Product (GDP) data for the fourth quarter (Q4). Meanwhile, the hawkish comments from Federal Reserve (Fed) officials provide some support for the US Dollar (USD). At press time, DXY is trading at 103.95, up 0.12% on the day. 

Several Fed officials have hinted in recent days about a cautious and slow approach. Philadelphia Fed President Patrick Harker advocated last week for steady and slow rate cuts to minimize risk and general uncertainty. Fed Governor Bowman said inflation will continue to drop with interest rates maintained at the current levels, but it is not yet time to start cutting rates, while Kansas City Fed President Schmid stated that with inflation running above target, labor markets tight, and demand showing considerable momentum, there is no need to preemptively adjust the stance of monetary policy.

The Fed has held its benchmark interest rate steady at its highest level since 2001. Policymakers said they prefer to wait for more data showing inflation returns to their target of annualized 2% before they will begin to cut the fed funds rate, despite inflation having fallen significantly since its summer peak. Financial markets expected the first rate cut will come in June meeting, from anticipation for a rate cut as early as March

Data released from the US Census Bureau on Tuesday showed that US Durable Goods Orders fell 6.1% in January from a 0.3% decline in December, weaker than the market expectation of a 4.5% drop. The Goods New Orders ex Defense, a proxy for capital spending, rose +0.1% MoM, matching the expectations. Finally, the US Consumer Confidence Index by the Conference Board arrived at 106.7, below the market consensus of 115.0.

Market participants will focus on the US GDP growth number for Q4, preliminary Goods Trade Balance, and Fed’s Bostic, Collins, and Williams speeches, due on Wednesday. The US Core Personal Consumption Expenditures Price Index (PCE) will take center stage on Thursday. Traders will take cues from the data and find trading opportunities around the Dollar Index. 

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Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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