USD Index climbs to 2-week highs near 103.20 ahead of data, Powell

The greenback adds to the ongoing recovery and prints new multi-week highs in the 103.20 region when tracked by the USD Index (DXY) on Thursday.

USD Index looks at Powell and docket

The index trades with gains for the second session in a row on Thursday and looks to consolidate the recent breakout of the 103.00 hurdle in a context still favourable to the risk-off trade.

In the meantime, the uptick in the dollar comes in tandem with a so far small recovery in US yields across the curve, particularly after Fed Chair Powell indicated at the ECB Forum in Sintra on Wednesday that a US recession is not the most likely scenario and suggested the potential for two consecutive rate hikes.

So far, and according to CME Group’s FedWatch Tool, the probability of a 25 bps rate hike at the Fed’s meeting on July 26 surpasses 80%.

In the US calendar, final Q1 GDP figures are due seconded by Initial Claims, Pending Home Sales and the speech by Atlanta Fed R. Bostic (2024 voter, hawk).

What to look for around USD

The index keeps pushing higher and extends the weekly recovery further north of the 103.00 hurdle on Thursday.

Meanwhile, the likelihood of another 25 bps hike at the Fed's upcoming meeting in July remains high, supported by the continued strength of key US fundamentals such as employment and prices.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: Final Q1 Growth Rate, Initial Jobless Claims, Pending Home Sales, Fed Powell (Thursday) – PCE, Core PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is up 0.22% at 103.19 and the breakout of 103.23 (weekly high June 29) would open the door to 104.69 (monthly high May 31) and then 104.95 (200-day SMA). On the other hand, the next contention emerges at 101.92 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).