The US dollar (USD) rebounded on Thursday, reclaiming the 104.00 level as traders reacted to weaker-than-expected Producer Price Index (PPI) data and positive jobless claims figures. The US Dollar Index (DXY) initially jumped after the data release, but later pared gains as investors assessed the implications of slowing inflation and potential demand concerns. Meanwhile, US diplomats arrived in Russia for ceasefire talks on Ukraine, and President Donald Trump heightened trade tensions by threatening to impose 200% tariffs on European wine and champagne.
Daily Market Movers: Mixed Economic Signals, Escalating Geopolitical Tensions
The US weekly unemployment claims report showed initial claims at 220,000, below the expected 225,000. Continuing claims fell to 1.87 million, below the forecast of 1.90 million.
The Producer Price Index (PPI) for February came in weaker than expected, with the headline monthly figure coming in at 0.0% versus the expected 0.3%, and the core PPI contracting by 0.1%.
On an annual basis, the headline PPI fell to 3.2%, below the expected 3.3%, while the core PPI fell to 3.4% from 3.6%.
Initially, markets viewed the weaker inflation data as positive for the US dollar, but the gains were quickly reversed as traders interpreted the weaker PPI figures as a sign of weak demand. US stocks fell after PPI data, with Trump’s latest trade threats targeting European imports further weighing on sentiment.
The CME Group’s FedWatch tool indicates that markets widely expect the Federal Reserve to hold interest rates at its March 19 meeting, while the probability of a rate cut in May and June continues to rise.
US Dollar Index (DXY) Technical Outlook: Oversold Rebound Facing Resistance
The US Dollar Index (DXY) recovered from multi-month lows, rising above 104.00 as traders reassessed oversold conditions. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators point to a short-term correction, although selling pressure remains prevalent after last week’s sharp decline. Key resistance lies near 104.50, while support lies at 103.50, with further downside possible if sellers regain control.
By Patricio Martin
