US Dollar Index tumbles below 98.30 ahead of US flash Q1 GDP, PCE inflation data

The US Dollar (USD) faces intense selling pressure against its major currency peers ahead of the release of the United States (US) preliminary Q1 Gross Domestic Product (GDP) and the Personal Consumption Expenditure Price Index (PCE) data for March, which will be published at 12:30 GMT.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.7% lower at around 98.28. The USD Index opened strongly after the Federal Reserve’s (Fed) monetary policy on Wednesday.

The US Bureau of Economic Analysis (BEA) is expected to show that the economy grew at an annualized pace of 2.3%, stronger than the previous reading of 0.5%.

The US core PCE inflation – which is the Fed’s preferred inflation gauge – is expected to have accelerated to 3.2% Year-on-Year (YoY) from 3% in February. On a monthly basis, the Fed’s preferred measure is expected to have risen at a moderate pace of 0.3% against the prior release of 0.4%.

Signs of strong US GDP growth and accelerating price pressures would prompt expectations for interest rate hikes by the Fed this year.

On Wednesday, the Fed left interest rates unchanged in the range of 3.50%-3.75%, as expected. However, the decision appeared to be a hawkish hold, as three members of the rate-setting committee dissented from the hold decision and advocated for a move away from the dovish bias, while one member voted for an interest rate cut.

Fed Chair Jerome Powell said in the press conference, “We [central bank] think the policy rate is in a good place,” while warning that the “economic outlook remains highly uncertain”, and “higher energy prices will push up inflation in the near term”.