FX.co ★ Dollar Holds Steady Ahead of PCE Data

On Friday, the US dollar index stabilized around 99.4 after a turbulent trading session. Investors are keenly awaiting the release of the PCE price index, the Federal Reserve’s favored inflation gauge. This report could provide early insights into whether tariffs are beginning to impact price dynamics, potentially swaying the Fed’s upcoming policy decisions. On Thursday, new data from the government confirmed that the US economy experienced contraction in the first quarter, marking the first instance of negative growth in three years, thereby introducing additional complexities to the Fed's interest rate considerations. In related developments, Mary Daly from the San Francisco Fed suggested that the central bank might still reduce rates twice this year, though she highlighted the necessity of maintaining the current stance to ensure inflation trends towards the Fed’s 2% target. The dollar experienced a brief rally on Thursday after a federal court declared President Trump’s reciprocal tariffs unlawful, but it reversed itself when an appeals court reinstated them, leading to renewed uncertainty in trade policy.