US Dollar Index: Range-bound consolidation as PCE looms – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar (USD) is firm, consolidating just above recent lows following the US Treasury buyback announcement. He expects the US Dollar Index (DXY) to remain confined to a 96.00–100.00 range over the next few months, as a widening US growth advantage is offset by potential dovish Federal Reserve (Fed) repricing and concerns over US fiscal credibility.

Dollar steady with defined DXY range

"USD is firm, consolidating just above last week’s US Treasury buyback announcement lows. US equity futures are treading water ahead of Nvidia Corp.’s results today. Crude oil prices extended this week’s drop as Iran and Oman aim to negotiate a permanent route within 30 to 60 days to resume shipping through the Strait of Hormuz."

"We continue to anticipate the DXY index to trade within a 96.00-100.00 range in the next few months. The tailwind to USD from the widening US growth edge relative to other major economies is offset by the risk of a dovish Fed repricing and worsening US fiscal credibility."

"Today’s July PCE print (1:30pm London, 8:30am New York) should echo the soft July CPI and retail sales data, giving the Fed room to stay on hold. Headline PCE is seen rising 0.1% m/m vs. -0.1% in June to be 3.6% y/y vs 3.7% in June. Core PCE is expected to rise 0.2% m/m vs. 0.1% in June and remain at 3.3% y/y for a second straight month. Real personal spending is expected at 0.0% m/m vs. 0.4% in June."

"Also watch the less noisy Dallas Fed trimmed mean PCE and the Cleveland Fed median PCE measures, due around the New York close, for a cleaner read on underlying inflation. Both moved closer to the Fed’s 2% target in June."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)