US Dollar advances as traders focus on PCE data with US yield repricing ignoring US debt ceiling discussions


  • US Dollar prints new highs against several G10 currencies after PCE Core Deflator came out higher as previous month and above expectations. 
  • US debt-ceiling talks continue into Friday, Biden mentions possible spending freeze and denies default while a deal is taking shape.
  • US Dollar Index pops back above 104 as recent data reprices more rate hikes to come from the Fed.

The US Dollar (USD) is printing new session's and weekly highs against several other currencies on the back of a batch of strong US data, while traders are hearing signals out of Washington that a plan on the debt ceiling is taking form. The strong US data points confirm the stance of the Fed that inflation remains sticky and possibly another rate hike is acceptable. US President Joe Biden gave more details on Thursday night about the debt talks and reiterated that there will be no default on his watch. 

On the macroeconomic data front,  the Personal Consumption Expenditure (PCE) inflation numbers came out above estimates with most important: the PCE Core Delfator MoM at 0.4% against the previous 0.3% and the YoY at 4.7% against the previous 4.6%. The Fed is right to remain vigilant in terms of sticky inflation as Personal Spending for April jumped from previous 0.0% to 0.8%. The CME Fedwatch tool now prices in a 102% probability for a July hike with only just one rate cut left for this year. This is a seismic shift against the odds from last week with three rate cuts and no hikes at all priced in for the rest of the year. 

Traders are not done yet for this Friday with the University of Michigan expectations and inflation expectations still due at 14:00 GMT. Although these are final readings for May, it can still move the needle further in favor of a stronger US Dollar. Should inflation expectations head higher as well, expect to see the DXY consolidate above 104 and see the Greenback print several weekly highs against most G10 currencies. 

Daily digest: US Dollar roars 

  • PCE Deflator MoM at 0.4% against 0.1% previous / YoY at 4.4% against 4.2% previous. The core PCE stands at 0.4% against 0.3% previous / YoY at 4.7% against 4.6%.
  • US people are spending with Personal Spending at 0.8% against 0.0% previous, while Personal Income increased a touch to 0.4% from 0.3%.
  • Durable Goods Orders dropped from 3.2% to 1.1% with an upward revision to 3.3% for the previous number / Ex. Transportation shrunk from 0.2% to -0.2% with an upward revision for the previous number to 0.3%. 
  • the US Yield curve is repricing on the back of the recent data and heads higher in terms of rates overall on the curve. 
  • US equity futures are heading in the green after a subdued start this Friday, while the Chinese Hang Seng Index closed nearly 2% lower.
  • The CME Group FedWatch Tool shows that markets are pricing in a 102% chance of rate hike for July and even June is now at a 57% chance for a hike. A big shift is being noticed ats well for the September expectations: A  rate cut expectation has been turned into a 85% possibility of a rate hike. 
  • US President Joe Biden commented after the last debt-ceiling meeting that a proposal is on the table for a spending freeze for two years, and reiterated again there will be no default. Meanwhile GOP debt negotiators gave ground on defence spending demands. 
  • Negotiator Garret Graves said that finding a debt-limit deal this Friday will be hard. 
  • US Credit Default Swaps (CDS) eases a touch to 163.875 after peaking at 165.83 on Thursday. The peak was last week on Monday at 177.62 when concerns for a default were at the highest. 
  • Fitch places Fannie Mae and Freddie Mac ratings on watch. 
  • US Treasury Cash balance dropped to $49.5 billion on Wednesday. 
  • The benchmark 10-year US Treasury bond yield trades at 3.83% and trades at session's high after PCE and Spending data alludes to more rate hikes from the Fed. 

US Dollar Index technical analysis: USD heads into the weekend above 104

The US Dollar Index (DXY) has taken out both the 55-day and the 100-day Simple Moving Averages (SMA), respectively, at 102.43 and 102.85 on the upside. The US Dollar safe-haven status keeps seeing bids for the DXY, with 104 having been broken early on Thursday and now eases a touch as a debt-ceiling deal takes some shape. 

On the upside, 105.73 (200-day SMA) still acts as long-term price target to hit, as the next upside key level for the US Dollar Index is at 104.00 (psychological, static level), and acts as an intermediary element to cross the open space.

On the downside, 102.85 (100-day SMA) aligns as the first support level to confirm a change of trend. In the case that breaks down, watch how the DXY reacts at the 55-day SMA at 102.48 in order to assess any further downturn or upturn. 

Nasdaq FAQs

What is the Nasdaq?

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

What is the Nasdaq 100?

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

How can I trade the Nasdaq 100?

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

What Factors Drive the Nasdaq 100

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD lost its traction and declined below 1.0850 in the American session on Thursday. Upbeat PMI data from the US, combined with the mixed action seen in Wall Street's main indexes, helps the US Dollar gather strength and weighs on the pair.

EUR/USD News

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD came under modest bearish pressure and declined toward 1.2700 in the second half of the day on Thursday. The US Dollar (USD) benefits from the PMI data, which showed an ongoing expansion in the private sector at an accelerating pace, and weighs on the pair.

GBP/USD News

Gold extends slide below $2,350.00

Gold extends slide below $2,350.00

Gold stays on the back foot and trades at its lowest level in over a week below $2,350. The benchmark 10-year US Treasury bond yield rises more than 1% following the stronger-than-forecast PMI data from the US, forcing XAU/USD to stretch lower.

Gold News

As Ethereum spot ETF approval nears, these altcoins could explode

As Ethereum spot ETF approval nears, these altcoins could explode

It is not surprising that altcoins related to Bitcoin saw a major rally post-Bitcoin spot ETF approval. Likewise, tokens closely related to Ether could ride the ETF approval wave. Ethereum Classic, Pepe, Floki and other DeFi tokens could gain momentum as the ETH ETF approval deadline nears. 

Read more

US S&P Global PMIs Preview: Economic expansion set to persist in May

US S&P Global PMIs Preview: Economic expansion set to persist in May

On Thursday, S&P Global will issue its flash estimates of the United States (US) Purchasing Managers Indexes (PMIs), a monthly survey of business activity. The survey is separated into services and manufacturing output and aggregated into a single statistic, the Composite PMI.

Read more

Forex MAJORS

Cryptocurrencies

Signatures