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US Dollar Index rebounds above 100 as PCE softens rate-hike bets
DXY is aiming to pare a three-day slide after US PCE inflation fell 0.1% in June, while crude oil volatility from US-Iran tensions keeps inflation concerns elevated.
The US Dollar Index, which tracks the greenback against a basket of currencies, bounced back above the 100.00 level during the Asian session on Friday, snapping a three-day losing streak, according to FXStreet.
FXStreet linked the rebound to cooling US inflation data, noting the US Personal Consumption Expenditures (PCE) Price Index fell 0.1% in June, the first monthly decline since April 2020. The outlet said the drop reflected a temporary truce in the Iran war that lowered gas prices, which dampened expectations for an immediate interest rate hike by the US Federal Reserve, contributing to the DXY's overnight slump.
However, FXStreet cautioned that inflation risks have not disappeared, citing volatile crude oil prices amid the US-Iran standoff. The article also pointed to geopolitics, including Iran rejecting Oman's proposed 50-50 joint management for the Strait of Hormuz, the US military completing heavy strikes against Iran after missile attacks, and Saudi Arabia building an international coalition to protect shipping routes from Yemen's Houthi militias, with a maritime embargo declared on July 20.
FXStreet added that core US PCE remains well above the Fed's 2% target, leaving room for at least one rate hike by year end, which could limit fresh bearish positioning in the dollar despite the sharp retracement earlier this week. The outlet also noted the index still has a heavy weekly-loss risk.
Latest closeWTI crude $86.80 ▲3.8%|Dollar index 99.80 ▼0.2%