- The US Dollar Index is expected to be around 98.40 during early Asian sessions on Friday.
- The second quarter saw a 3.8% growth rate in the US economy, with initial unemployment claims dropping to 218,000 last week.
- The August PCE inflation report will be a key focus later on Friday.
The US Dollar Index (DXY), which measures the dollar against a selection of six major currencies, will be trading strongly, hovering near 98.40 during Friday’s Asian trading hours. This marks a near three-week high as recent US economic data suggests that future interest rate cuts might be less likely from the Federal Reserve.
In the second quarter, US gross domestic product (GDP) grew at an annual rate of 3.8%. This figure beats previous estimates and surpasses the expected 3.3%. The favorable economic data has caught the attention of some buyers, leading to an uptick in the US Dollar (USD).
Additionally, initial unemployment claims for the week ending September 20th fell to 218,000, down from a previous reading of 232,000 (which was revised from 231,000).
Traders are weighing mixed signals from Federal Reserve policymakers. Kansas City Fed President Jeffrey Schmidt mentioned that interest rate cuts were necessary to maintain a strong job market. Meanwhile, Chicago Fed President Austan Goolsbee expressed hesitance about easing policies further, particularly as inflation remains above target.
Currently, the financial markets are anticipating close to a 43 basis point rate cut in the two remaining policy meetings this year, though opinions from policymakers suggest that future decisions will hinge on upcoming inflation and labor statistics.
As we move ahead, traders will be closely watching the US PCE inflation data set for later on Friday. The expectations are that the headline figures will reveal a 2.7% year-on-year increase for August, with core PCE likely showing a 2.9% rise. If the inflation data comes in softer than expected, it might strengthen the case for a Fed rate reduction, potentially pulling the DXY down.
