US Dollar strengthens following hot PPI figures

• US core and headline PPI came in higher than expected in February.
• On the negative side, Retail Sales from February and weekly Initial Jobless Claims came in lower than expected.
• US Treasury yields rose to two-week highs.

The US Dollar Index (DXY) is currently trading at 103.36, up 0.55%, on Thursday. The Greenback got a boost following the release of hot Producer Price Index (PPI) figures, which triggered a rally in US Treasury yields. On the negative side, Retail Sales and Jobless claims figures came in soft.

Despite inflation in the US remaining sticky, expectations on the start of the easing cycle of the Federal Reserve (Fed) remain steady. Markets are discounting that the rate cuts will begin in June, but the focus will now be on the revised Dot Plot for the upcoming March meeting to gather additional evidence on the Fed’s stances.

Daily digest market movers: DXY rallies as markets digest PPI data 

• The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for February increased by 1.6% YoY, which outperformed a consensus of 1.1% and is an improvement from the previous 1%.
• The core PPI showed an increase of 2.8% YoY, higher than the previous 2.6%.
• Retail Sales for February reported by the US Census Bureau, showed a monthly increase of 0.6% (MoM), below the 0.8% expected.
• The Initial Jobless Claims for the week that ended on March 9 was reported to be at 209K, lower than the predicted figure of 218K but higher than the previous 210K.
• Overall, the economic outlook in the US is mixed, with signs of sticky inflation and weak economic activity.
• Markets are currently predicting less than 15% and 60% for a Fed rate cut in May and June, respectively, which aligns closer to the Fed's outlook for three cuts this year.
• US Treasury yields soared with the 2-year yield at 4.70%, the 5-year yield at 4.29%, and the 10-year yield at 4.28%.

DXY technical analysis: DXY opens gaps for bulls as bears lose momentum

On the daily chart, the Relative Strength Index (RSI) has a positive slope yet drifts in negative territory, signaling that bulls are slowly building momentum. Coupled with this, the decreasing red bars on the Moving Average Convergence Divergence (MACD) histogram corroborate the growing buying momentum as the sellers lose traction.

Furthermore, the positioning of DXY below its 20,100 and 200-day Simple Moving Averages (SMAs) underscores the embedded bearish outlook. However, if the buyers make a move above the 20-day average at around 103.50, the outlook might shift in favor of the bulls.