US Dollar stays in red territory ahead of GDP, PCE data

Data on US income, spending, consumer confidence, and Q1 GDP will likely shape the US Dollar Index’s trajectory this week.

Fed’s Beige Book report on Wednesday is expected to suggest a balanced economic backdrop. Investors anticipate less than 80% odds of November rate cut and 50% chance of cut in September. The US Dollar Index is seeing some losses on Monday as US markets remain closed for the Memorial Day break. Market participants anticipate Thursday’s Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) data in hope of additional insights into the Federal Reserve’s (Fed) stance and the economy’s health.

The Beige Book report on Wednesday will also be eagerly anticipated. The US economy, backed by robust data, allows the Fed to maintain its hawkish stance, which cushions the US Dollar. Despite some signs of labor market softening and dampened consumer spending, inflation remains high, which justifies Fed officials’ continued talk of patience.

Officials from the Fed, including Mester, Bowman, Kashkari, Cook and Daly, are expected to continue advocating for a cautious approach in their scheduled speeches throughout the week. Markets continue to adjust their expectations, odds of September cut stand around 50%.

April’s Personal Consumption Expenditure (PCE) report is expected on Friday. Projections remain at 2.7% YoY for headline inflation, 2.8% for core. Q1 GDP is expected to be revised to 1.3% on Thursday.

Technically; the US dollar witnesses selling pressure, while bulls struggle. The daily chart indicators display escalating bearish momentum in the DXY. The Relative Strength Index (RSI) is on a negative slope and remains in negative territory, suggesting that selling pressure prevails. This is further confirmed by the flat red bars of the Moving Average Convergence Divergence (MACD) indicator.