Investing.com – The U.S. dollar fell on Tuesday despite U.S. short-term interest rates holding steady, weighed by a broader decline in market volatility and rising risk appetite among investors. This change can be partially attributed to the expectation of a tender economic landing in the US – a scenario that investors are preparing for ahead of the upcoming release of headline PCE inflation data.

The release of the core personal consumption expenditures (PCE) price index for April is scheduled for Friday, with market consensus predicting a modest 0.2% month-on-month gain. This figure, consistent with previously released April data for the Consumer Price Index (CPI) and Producer Price Index (PPI), is key because it could change expectations for a potential Federal Reserve interest rate cut in September, currently estimated at 44%. Confirmation of bland inflation may put further pressure on the dollar.

Today’s economic calendar will reveal March home price data and May consumer confidence data. The latter is particularly noteworthy as consumer confidence has been trending down since January, raising concerns about whether spending by the top 20% of income earners will be able to continue to offset the economic challenges faced by the lower 60% of income earners. ING suggested that higher interest rates could ultimately curb consumer spending and sluggish U.S. economic growth throughout the year.

The (DXY) indicator, a measure of a currency against a basket of other major currencies, is approaching a critical support level at 104.40. This threshold is the lower limit of this year’s dollar rally. A drop below this point could signal that investors holding long dollar positions may begin to reduce their exposure in anticipation of the release of essential data at the end of the week.

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