The US Dollar Index (DXY) is currently retracing towards 104.00 after enjoying its fifth consecutive week of gains. Analysts at ING have examined the outlook for the Greenback.
Expectations suggest that the Dollar might retain its strength for the remainder of this month. This is supported by seasonal factors, with caution arising from the release of robust January US Producer Price Index (PPI) data on Friday. The upcoming release of the core Personal Consumption Expenditures (PCE) inflation data, scheduled for February 29, which is the Federal Reserve’s preferred gauge, could potentially echo a high 0.4% month-on-month figure. This might continue to undermine the disinflation trade, aligning with our outlook. As we progress into early March, investors might begin positioning themselves for a softer Dollar ahead of the February Consumer Price Index (CPI) data due on March 12. It’s anticipated that core inflation could retreat to a 0.2% month-on-month reading.
While our expectations indicate that DXY might remain within the 104.00-105.00 range for this week, there are technical considerations to note. Despite the anticipated range, there’s a possibility of an unexpected break below 104.00 if there’s any unforeseen strength in the Euro throughout the week.