The U.S. Dollar index Futures (DX) traded little changed in the early New York session on Thursday as the derivative instrument tied to America’s fiat currency did not find follow-through buying.
DX rallied to an intraday high of 97.655 on Wednesday, catalyzed by a raft of positive economic data and the minutes of the January Federal Open Market Committee (FOMC) meeting, which assumed a hawkish tone. It rallied past the 97.70 mark in the Asian session on Thursday before pulling back. The DXY futures were last seen trading marginally higher.
Fed On Extended Pause? Weighing in on the messaging from the minutes of the Jan. 27-28 FOMC meeting, LPL Chief Economist Jeffrey Roach said he does not expect a rate cut until June. The minutes revealed that the monetary policy committee members expect the real GDP growth to outpace potential growth through 2028 as the drag from higher tariffs waned, and the fiscal policy and financial market conditions continues to support spending.
The Fed staffers expect the unemployment rate to decline gradually starting this year, moving below their estimate of its natural rate by the end of the year and remaining below the natural rate through 2028.
That said, the FOMC viewed the “uncertainty around the forecast as elevated,” given the geopolitical developments, government policy changes and their effects, and the effect of AI on the economy, as well as delays in statistical releases and related data-quality issues.
Highlighting interesting items teased in the minutes, LPL’s Roach said the Fed seems to think financial‑stability risks are building under the surface. “Asset valuations are high, credit spreads are tight, and AI‑related investment has created new pockets of risk, especially in private credit, leveraged firms, and highly concentrated tech names.”
BMO Capital Markets Chief US Economist Scott Anderson said the officials made clear their growing concern regarding persistent inflation and diminishing concern around downside risks to the labor market, underlining the clear hawkish tilt. The economist also pointed to the fact that several FOMC members indicated that “they would have supported a two-sided description of the Committee's future interest rate decisions.”
DX Rangebound: The real test for the DX is the stiff resistance around the 98 area. It would take a clear break above the zone for the futures to head toward the next resistance areas around the 98.6 and the 100 levels. The DX futures has strong support around the 96.6 level.
Source: TradingView
What’s Ahead? The weekly jobless claims report and the December trade balance report could be key for the DX futures’ near-term trajectory. A spike in jobless claims and/or a wider-than-expected December trade deficit could take the wind out of the dollar’s sail, while a benign jobless claims report and smaller deficit could provide the dollar with some short-term support.
