Longer-term traders are focusing on the 200-day moving average at 104.990. This means they expect more weakness, which means they’ll be looking to sell the current rally.
Traders should also look for increased volatility since we’re in a news driven market.
At 15:11 GMT, the U.S. Dollar Index is trading 108.182, up 0.239 or +0.22%.
Inflation Data in Focus
The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index rose 0.3% in January and increased by 2.5% year-over-year, down from December’s 2.6%. The core PCE, which excludes food and energy and is closely watched by the Fed, also rose 0.3% month-over-month and eased to 2.6% annually, down from an upwardly revised 2.9%. These readings met economists’ expectations and suggested that while inflation is easing, it remains sticky above the Fed’s 2% target.
Market participants continued to price in 61 basis points of rate cuts this year, with the first cut not fully expected until July, according to LSEG data. Peter Cardillo, chief market economist at Spartan Capital Securities, noted that while inflation showed signs of cooling, the Fed could face a dilemma as broader economic indicators point to a slowing economy.
Tariff Threats Weigh on Sentiment
Investor sentiment was also pressured by renewed tariff threats from US President Donald Trump. Trump announced that 25% tariffs on imports from Canada and Mexico would take effect on March 4, earlier than previously indicated. Additional 10% duties on Chinese goods and proposed 25% tariffs on European Union imports added to market jitters, reviving fears of an escalating global trade war.
