US Dollar (DXY) Index News: Weaker Economic Growth, Treasury Yields Weigh

Economic Growth Revised Downward

Revised data revealed that the U.S. economy grew at a slower pace than previously estimated in Q1 2024. The Commerce Department reported an annualized GDP growth rate of 1.3%, down from the initial estimate of 1.6%, primarily due to downward revisions in consumer spending. This follows recent soft retail sales and equipment spending figures, contributing to reduced expectations for Federal Reserve interest rate cuts.

Helen Given, an FX trader at Monex USA, noted, “All of these figures coming in below expectations … is taking a bit of heat off of the Fed.”

Treasury Yields and Dollar Movements

A two-day, 15-basis point surge in long-term Treasury yields above 4.6% had temporarily boosted the dollar on Wednesday. The DXY reached 105.18 overnight, its highest level since mid-May, but fell 0.37% to 104.71 by late Thursday.

Yen and Euro Movements

The dollar dropped 0.51% against the Japanese yen, trading at 156.79 after hitting a one-month high of 157.72 on Wednesday. Charu Chanana, head of FX strategy at Saxo Bank, pointed out potential Japanese intervention concerns as the yen neared the 158 level, a critical point for possible action by Japanese authorities.

The euro rose 0.33% to $1.0836, rebounding from a two-week low of $1.0789 reached overnight. Sterling also recovered, up 0.2% to $1.2733 after falling 0.5% on Wednesday.

Market Focus on Inflation Data

Expectations for Fed rate cuts have been scaled back amid persistent inflation pressures. Traders are now closely watching Friday’s release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, for further clues on monetary policy. Additionally, eurozone price data due Friday will provide insights following stronger-than-expected German inflation data earlier this week.