The first look at US Q1 GDP and the latest Core PCE data are the highlights of a busy week for the US dollar as traders gear themselves for next week’s FOMC rate decision. Financial markets are pricing in a 25 basis point rate hike on May 3rd (86% probability), before the central pauses for the next three meetings. The first-rate cut in the US is currently seen at the November 1st meeting but this may change depending on this week’s economic releases. There will be no Fed commentary until next week’s FOMC meeting.
For all market-moving data releases and economic events see the real-time DailyFX calendar while the new Earnings Calendar highlights this quarter’s global company releases.
US Bill and Bond yields are marginally lower today with the 3-month T Bill on offer at 4.96%, down from 5.09% last week, while the US Treasury 2-year is trading at 4.15%, down from last Wednesday’s 4.29% multi-week high. Short-dated US Bill yields have been pushed higher recently by higher rate expectations and fears over the impending US debt ceiling. The US 10-year/2-year curve is inverted by 61 basis points, an ongoing signal that the market expects the US to enter into a recession this year.
Current US dollar price action is limited and confined to a tight short-term trading range. The greenback is testing support around 101.10 and a break below here would see 101.00 and then the 100.40-100.60 area as the next levels of technical support. The US dollar has made repeated attempts to break above the 20-day moving average in recent days and failed, highlighting the greenback’s current weakness.
US Dollar (DXY) Daily Price Chart – April 24, 2023