US Dollar gathers traction on strong GDP and PCE data

• US Dollar Index DXY jumps above 107.00 after a hotter-than-expected inflation component in GDP data.
• CME FedWatch Tool now shows a near 35% probability that rates will remain steady in June, with cuts still on the table.
• Focus will shift to labor market data from February to be released at the beginning of March.

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is extending gains on Thursday, breaking above 107.00 as markets digest the second reading of United States (US) Gross Domestic Product (GDP) and its inflation components. Traders were caught off guard by hotter-than-expected Personal Consumption Expenditures (PCE) data, reinforcing concerns over persistent inflation.

Daily digest market movers: US Dollar rallies after GDP inflation surprises

• US GDP for Q4 2024 came in as expected at 2.3%, confirming steady economic growth.
• PCE inflation component exceeded expectations at 2.4%, while core PCE surged to 2.7%, compared to the 2.5% forecast.
• US Initial Jobless Claims rose to 224,000 for the week ending February 21, signaling slight labor market weakness.
• US Continuing Claims declined to 1.862 million, beating the 1.870 million forecast.
• On the foreign policy front, US President Donald Trump sowed confusion over tariff implementation, contradicting earlier statements.
• Markets react to tariff uncertainty as Trump doubles down on 25% levies on Canada and Mexico, which will come into effect on March 4.

DXY technical outlook: Bulls reclaim key levels but momentum remains fragile

The US Dollar Index has rebounded strongly above 107.00, reclaiming the 100-day Simple Moving Average (SMA) at 106.60. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicate improving momentum, but the bullish push still needs confirmation. Resistance lies at 107.30, while support levels are seen at 106.60 and 106.00 in case of a reversal.