The US dollar depreciates after tender PCE data

DXY loses as profit taking begins and falls towards 107.80.
Traders are analyzing disinflationary PCE data after the Fed’s hawkish interest rate cut on Wednesday.
Soft inflation readings may not change the Fed’s wait-and-see stance.

The US dollar index (DXY), which measures the value of the US dollar against a basket of currencies, gained after the release of delicate personal consumption expenditure (PCE) data during the European session. Markets are also assessing political problems in the US, which are deteriorating market sentiment.

Daily Market Roundup: US Dollar Reacts to PCE Disinflation, Shutdown Risks and Fed Position

The risk of a US government shutdown has increased as House Republicans have failed to pass a funding deal. While miniature outages may have a narrow impact on the market, negotiations remain in focus.
Long-term Treasury yields continue to rise, with the 10-year yield near 4.60% and the 30-year yield at 4.77%, steepening the yield curve.
November PCE data were softer than expected, with monthly headline inflation at 0.1% and annual headline inflation at 2.4%, below the forecast of 2.5%.
Core PCE also failed to meet expectations. This slight hint of disinflation, however, may not significantly change the Fed’s recent hawkish stance.
The Federal Reserve’s hawkish signals and fewer cuts expected for 2025 continue to support the relative strength of the US dollar.
Meanwhile, solid third-quarter GDP at 3.1% SAAR and solid consumer spending underscore U.S. economic resilience.
The Atlanta Fed’s PKBNow model projects fourth-quarter growth at 3.2% SAAR, and the New York Fed’s Nowcast model projects fourth-quarter growth at 1.9% SAAR, maintaining an positive growth narrative.

DXY Technical Outlook: Indicators break below 108.00

After Wednesday’s upward movements, the indicators recover on Friday below 108.00, currently oscillating around 107.60. The pullback suggests the recent rally may be taking a breather. Still, if DXY can hold above its 20-day basic moving average, the broader bullish structure will remain intact, leaving room for further gains as profit-taking declines and fundamentals re-establish.