US Dollar Index (DXY) Extends Gains as Investors Focus on 200-day Moving Average

Longer-term traders are focusing on the 200-day moving average at 104.990. This means they expect more weakness, which means they'll be looking to sell the current rally.

Longer-term traders are focusing on the 200-day moving average at 104.990. This means they expect more weakness, which means they’ll be looking to sell the current rally.

Traders should also look for increased volatility since we’re in a news-driven market.

At 15:11 GTM, the U.S. Dollar Index is trading 108.182, up 0.239 or +0.22%.

U.S. PCE Inflation Remains Sticky

The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index rose 0.3 percent in January and increased by 2.5 percent year-over-year, decreasing from December’s 2.6 percent. The core PCE, which excludes food and energy and is closely monitored by the Federal Reserve, also rose 0.3 percent and decreased to 2.6 percent annually, compared to an upwardly revised 2.9 percent. These readings aligned with economists’ predictions and indicated that while inflation is diminishing, it remains elevated above the Fed’s 2 percent target.

Moreover, market participants continued to price in 61 basis points of rate cuts this year, with the first cut not fully anticipated until July, according to LSEG data. Peter Cardillo, chief market economist at Spartan Capital Securities, mentioned that while inflation showed signs of cooling and the PCE reading came in as expected, the Fed could face a dilemma as broader economic indicators hint at a slowing economy.

"The Fed has a tough decision to make because while inflation is coming down slowly, the economic indicators are showing a slowing economy," Cardillo stated.

Tariff Threats Increase Market Pressures

Furthermore, investor sentiment faced pressure from renewed tariff threats by U.S. President Donald Trump. Trump announced that 25 percent tariffs on imports from Canada and Mexico would take effect on March 4, which is earlier than previously announced.

Additionally, 10 percent duties on Chinese goods and proposed 25 percent tariffs on European Union imports contributed to market jitters, increasing fears of an escalating global trade war.

The Canadian Dollar fell sharply, with USD/CAD rising by 0.6 percent to trade at 1.3808. Meanwhile, the Euro remained largely unchanged, trading at 1.1171.

In other economic news, the University of Michigan’s preliminary reading of the consumer sentiment index for March fell to 63.0, compared to February’s reading of 67.0 and economists’ estimate of 66.0. This decline in sentiment could dampen consumer spending in the coming months.output: Longer-term traders are focusing on the 200-day moving average at 104.990.

This means they expect more weakness, which means they’ll be looking to sell the current rally.

Traders should also look for increased volatility since we’re in a news-driven market.

At 15:11 GMT, the U.S. Dollar Index is trading 108.182, up 0.239 or +0.22%.

Inflation Data in Focus

The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index rose 0.3% in January and increased by 2.5% year-over-year, down from December’s 2.6%. The core PCE, which excludes food and energy and is closely watched by the Fed, also rose 0.3% month-over-month and eased to 2.6% annually, down from an upwardly revised 2.9%. These readings met economists’ expectations and suggested that while inflation is easing, it remains sticky above the Fed’s 2% target.

Moreover, market participants continued to price in 61 basis points of rate cuts this year, with the first cut not fully expected until July, according to LSEG data. Peter Cardillo, chief market economist at Spartan Capital Securities, noted that while inflation showed signs of cooling and the PCE reading came in as expected, the Fed could face a dilemma as broader economic indicators point to a slowing economy.

“The Fed has a tough decision to make because while inflation is coming down slowly and the PCE reading came in as expected, the economic indicators are showing a slowing economy,” Cardillo said.

Tariff Threats Weigh on Sentiment

Additionally, investor sentiment was pressured by renewed tariff threats from U.S. President Donald Trump. Trump announced that 25% tariffs on imports from Canada and Mexico would take effect on March 4, which is earlier than previously indicated.

Furthermore, 10% duties on Chinese goods and proposed 25% tariffs on European Union imports added to market jitters, reviving fears of an escalating global trade war.

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