Investing.com — The U.S. dollar fell on Tuesday even as short-term U.S. yields held steady, driven by a broader decline in market volatility and growing risk appetite among investors. This shift is partly attributed to expectations of a soft US economic landing, a scenario that investors are preparing for ahead of the upcoming release of core PCE inflation data.
The main personal consumption expenditure (PCE) price index for April is expected to be released on Friday, with market consensus predicting a modest 0.2% month-on-month increase. This figure, which is in line with previously published Consumer Price Index (CPI) and Producer Price Index (PPI) data from April, is critical as it raises expectations for a possible Federal Reserve rate cut in September, which is currently on a high probability. of 44% is estimated, could change. A confirmation of favorable inflation could put further pressure on the dollar.
Today’s economic calendar will reveal March house price data and May consumer confidence figures. The latter is especially notable as consumer confidence has been on a downward trend since January, raising concerns about whether spending by the top 20% of income earners can continue to offset the economic woes of the bottom 60%. ING has suggested that higher rates could ultimately dampen consumer spending and slow U.S. growth throughout the year.
The (DXY), a benchmark for the currency against a basket of other major currencies, is approaching a critical support level at 104.40. This threshold represents the lower limit of the dollar’s rally this year. A decline below this point could signal that investors with long dollar positions could begin to reduce their exposure ahead of the major data release at the end of the week.
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