June PCE data showed a 0.1% decline, easing Fed rate hike bets and pressuring the USD before Friday’s recovery.
The US Dollar Index (DXY) recovered above the 100.00 mark in early Asian trading Friday, halting a three-day losing streak that pushed it to its lowest level since June 17. The rebound follows Thursday’s slump, driven by softer-than-expected June PCE data, which fell 0.1%—the first monthly decline since April 2020—amid lower gas prices tied to a temporary Iran truce.
The index remains on track for significant weekly losses as markets scaled back expectations for an immediate Fed rate hike. However, volatility in crude oil prices, fueled by escalating US-Iran tensions, continues to stoke inflation concerns. Iran’s rejection of a joint management plan for the Strait of Hormuz and recent US military strikes further dampened hopes for a diplomatic resolution.
Geopolitical risks persist as Saudi Arabia assembles a coalition to secure key shipping routes from Houthi attacks, adding to regional instability. The interplay between cooling inflation data and geopolitical uncertainty remains a key driver for USD movements.