- The dollar index previously hit 108.49, the highest since November 2022.
- The US dollar rose as the Federal Reserve emphasized caution on its policy outlook.
- U.S. gross domestic product (annualized) reported growth of 3.1% in the third quarter, beating expectations for a 2.8% increase.
The US Dollar Index (DXY), which measures the value of the US dollar (USD) against six other major currencies, remains at around 108.50, its highest level since November 2022. This follows the Federal Reserve's hawkish 25. The basis point (bps) interest rate was cut on Wednesday, bringing the benchmark lending rate down to 4.25-4.50%, the lowest level in two years.
U.S. Treasury yields rose more than 2.50% on Wednesday and the dollar strengthened after the Federal Reserve emphasized its cautious stance on further rate cuts. Fed Chairman Jerome Powell said the Fed would be cautious about cutting rates further as inflation is expected to remain above its 2% target. At the time of writing, the 2-year bond yield is 4.30% and the 10-year bond yield is 4.56%.
The Fed's monetary policy statement suggested that economic activity remained strong, although it noted that labor market conditions were softening. The Fed's Summary of Economic Projections (SEP), or “dot plot,” predicts only two rate cuts in 2025, down from the four rate cuts predicted in September.
In the United States, Thursday's data showed annual U.S. gross domestic product (GDP) growth of 3.1% in the third quarter, beating both market expectations and the previous reading of 2.8%. Additionally, the number of new jobless claims for the week ending December 13 was 220,000, down from 242,000 the previous week and below market expectations of 230,000.
Traders will be focused on key U.S. economic indicators, including personal consumption expenditures (PCE) and the Michigan Consumer Confidence Index, scheduled to be released by the U.S. Bureau of Economic Analysis on Friday.
economic indicators
Core Personal Consumption Expenditure – Price Index (Mom)
Core personal consumption expenditure (PCE) is published by the government. U.S. Bureau of Economic Analysis Measures changes in the prices of goods and services purchased by United States (US) consumers on a monthly basis. The PCE price index is also the Federal Reserve's recommended measure of inflation. Month-over-month figures compare the price of a product in the base month to the previous month. Core values exclude so-called more volatile food and energy components to more accurately measure price pressures. Generally, high numbers are bullish for the US dollar (USD), while low numbers are bearish.
