US Dollar Index (DXY)
The US Dollar Index (DXY) settled around the level of 99.4 during today's trading on Friday, after a volatile trading session that witnessed a reaction to various economic and political developments.
This relative stability comes as markets await the release of the personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation, as the report may provide important hints about the impact of tariffs on prices, and therefore its possible impact on future decisions of the central bank.
The impact of economic data on the forecast of monetary policy
Government data released on Thursday showed the US economy contracted in the first quarter of the year, recording the first decline in growth in three years.
This downturn has raised questions about the course of monetary policy, especially with the increasing challenges facing Fed policymakers between fighting inflation and supporting economic growth.
Mary Daly, president of the Federal Reserve Bank of San Francisco, also stressed that the central bank still has room to cut interest rates twice this year, but stressed the need to maintain stability for now to ensure that inflation returns to the target level of 2%.
Dollar fluctuations and political developments
The US Dollar experienced sharp fluctuations during trading on Thursday, initially rising after a federal court ruled that tariffs imposed by former President Donald Trump on some imports were illegal.
But this rise did not last long, as the court of Appeals reinstated the duties, which provoked a new wave of uncertainty in US trade policy, and weak growth data also contributed to increasing pressure on the US currency.
The Fed's caution
The minutes of the last meeting of the Federal Reserve revealed the intention of officials to maintain a cautious stance in their monetary policies, carefully balancing the risks of high inflation and the consequences of a slowdown in the labor market.
It seems that the bank's future decisions will still depend on the reading of economic data, especially with the upcoming release of the PCE index report.
