The dollar consolidated at high levels ahead of the release of US PCE data, with the market betting on an 82% probability of a Fed rate hike this year.
2026-06-25 13:50:03
Ahead of the European session on Thursday, the US dollar index (DXY) maintained a high level of consolidation, last trading around 101.52 . Although slightly lower than the previous trading day's high, it remains in its highest range in over a year. The market is awaiting the release of the US May Personal Consumption Expenditures Price Index (PCE) data later in the day to further assess the trend of US inflation and the future policy path of the Federal Reserve.
Looking at the performance of major currencies, the US dollar's overall trend is diverging. The safe-haven currency, the Swiss franc, performed the strongest, with the US dollar weakening slightly against the Swiss franc, while commodity currencies such as the Australian dollar and New Zealand dollar continued to be under pressure. The euro, pound sterling, and yen saw relatively limited fluctuations against the US dollar, indicating that the market is maintaining a cautious wait-and-see attitude ahead of key inflation data releases.
The market's current focus is on the US core PCE data. As one of the Federal Reserve's most closely watched inflation indicators, core PCE more accurately reflects changes in potential price pressures and is therefore considered an important reference for future interest rate policy. The market generally expects the US May core PCE annual rate to rise to 3.4% from the previous value of 3.3% , while the overall PCE data is expected to remain at a high level. If the final result exceeds market expectations, it may further strengthen market expectations that the Federal Reserve will continue to tighten monetary policy and drive the US dollar to maintain its strong performance.
Recent rising inflation expectations in the United States are directly related to the sharp increase in energy prices during the escalation of the Middle East conflict. Although the Strait of Hormuz has recently resumed normal navigation and international oil prices have fallen somewhat, the transmission effect of previous energy cost increases on consumer prices has not yet fully subsided. As a result, market expectations for Federal Reserve policy have changed significantly. Before the outbreak of the Middle East conflict, the market had anticipated two interest rate cuts by the Fed this year. However, with rising energy prices pushing up inflationary pressures, investors have begun to readjust their interest rate expectations.
According to the CME FedWatch tool, the market now expects nearly 82% of the Federal Reserve to raise interest rates this year, with a 42.2% probability of at least two rate hikes. This shift indicates that the market has largely abandoned its previous expectations of loose monetary policy and is now betting on a longer period of high interest rates. Meanwhile, the recent emphasis by new Fed Chairman Kevin Warsh on the importance of price stability has further solidified the market's perception of a hawkish policy stance. Despite some corrections in energy prices, the US job market and consumer activity remain robust, giving the Fed room to maintain its tightening policy.
From a market sentiment perspective, the US dollar remains strongly supported. On the one hand, the US economy has demonstrated greater resilience compared to other major economies; on the other hand, uncertainty surrounding the global economic growth outlook is driving some safe-haven funds towards US dollar assets. In the coming days, in addition to PCE data, investors will focus on the performance of the US job market, speeches by Federal Reserve officials, and subsequent changes in inflation data to assess whether the Fed will take further interest rate hikes in the second half of this year.
From a daily chart perspective, the US dollar index continues to trade in a high-level range, currently hovering around 101.52 , just a step away from the more than one-year high of 101.80 reached on Wednesday. The overall trend remains clearly upward, with bulls still in control. The first resistance level to watch in the short term is around 101.80; a decisive break above this level could open up further upside potential and challenge the 102.50 area. Support levels are located at 101.00 and 100.50; as long as it remains above the 100 level, the medium-term upward trend is expected to continue.
Observing the 4-hour chart, the US dollar index has entered a consolidation phase at high levels after a continuous rise. The market is awaiting PCE data for new directional guidance in the short term. The price remains above the major moving average system, indicating a continued strong short-term trend. Although some technical indicators show signs of overbought conditions, suggesting a slowdown in upward momentum, the potential for a pullback remains limited. If the PCE data is higher than expected, the US dollar index is expected to break through 101.80 and continue its upward trend; conversely, if the inflation data is lower than market expectations, it may trigger some profit-taking, pushing the index back to test the 101.00 support area.
Editor's Summary : Ahead of the US PCE data release, the overall US dollar market maintained a cautiously optimistic atmosphere. Although the recent decline in oil prices has eased some inflation concerns, the market generally believes that US inflationary pressures have not completely subsided, making it highly likely that the Federal Reserve will maintain a hawkish stance. Current market expectations for an interest rate hike this year have clearly intensified, becoming an important foundation supporting the dollar's strength. In the short term, the PCE data will be a key catalyst determining the dollar's next stage of movement. If inflation continues to exceed expectations, the dollar is expected to further refresh its recent highs; if inflation cools significantly, it may prompt the market to reassess its interest rate hike expectations, bringing some downward pressure.
Looking at the performance of major currencies, the US dollar's overall trend is diverging. The safe-haven currency, the Swiss franc, performed the strongest, with the US dollar weakening slightly against the Swiss franc, while commodity currencies such as the Australian dollar and New Zealand dollar continued to be under pressure. The euro, pound sterling, and yen saw relatively limited fluctuations against the US dollar, indicating that the market is maintaining a cautious wait-and-see attitude ahead of key inflation data releases.
The market's current focus is on the US core PCE data. As one of the Federal Reserve's most closely watched inflation indicators, core PCE more accurately reflects changes in potential price pressures and is therefore considered an important reference for future interest rate policy. The market generally expects the US May core PCE annual rate to rise to 3.4% from the previous value of 3.3% , while the overall PCE data is expected to remain at a high level. If the final result exceeds market expectations, it may further strengthen market expectations that the Federal Reserve will continue to tighten monetary policy and drive the US dollar to maintain its strong performance.
Recent rising inflation expectations in the United States are directly related to the sharp increase in energy prices during the escalation of the Middle East conflict. Although the Strait of Hormuz has recently resumed normal navigation and international oil prices have fallen somewhat, the transmission effect of previous energy cost increases on consumer prices has not yet fully subsided. As a result, market expectations for Federal Reserve policy have changed significantly. Before the outbreak of the Middle East conflict, the market had anticipated two interest rate cuts by the Fed this year. However, with rising energy prices pushing up inflationary pressures, investors have begun to readjust their interest rate expectations.
According to the CME FedWatch tool, the market now expects nearly 82% of the Federal Reserve to raise interest rates this year, with a 42.2% probability of at least two rate hikes. This shift indicates that the market has largely abandoned its previous expectations of loose monetary policy and is now betting on a longer period of high interest rates. Meanwhile, the recent emphasis by new Fed Chairman Kevin Warsh on the importance of price stability has further solidified the market's perception of a hawkish policy stance. Despite some corrections in energy prices, the US job market and consumer activity remain robust, giving the Fed room to maintain its tightening policy.
From a market sentiment perspective, the US dollar remains strongly supported. On the one hand, the US economy has demonstrated greater resilience compared to other major economies; on the other hand, uncertainty surrounding the global economic growth outlook is driving some safe-haven funds towards US dollar assets. In the coming days, in addition to PCE data, investors will focus on the performance of the US job market, speeches by Federal Reserve officials, and subsequent changes in inflation data to assess whether the Fed will take further interest rate hikes in the second half of this year.
From a daily chart perspective, the US dollar index continues to trade in a high-level range, currently hovering around 101.52 , just a step away from the more than one-year high of 101.80 reached on Wednesday. The overall trend remains clearly upward, with bulls still in control. The first resistance level to watch in the short term is around 101.80; a decisive break above this level could open up further upside potential and challenge the 102.50 area. Support levels are located at 101.00 and 100.50; as long as it remains above the 100 level, the medium-term upward trend is expected to continue.
Observing the 4-hour chart, the US dollar index has entered a consolidation phase at high levels after a continuous rise. The market is awaiting PCE data for new directional guidance in the short term. The price remains above the major moving average system, indicating a continued strong short-term trend. Although some technical indicators show signs of overbought conditions, suggesting a slowdown in upward momentum, the potential for a pullback remains limited. If the PCE data is higher than expected, the US dollar index is expected to break through 101.80 and continue its upward trend; conversely, if the inflation data is lower than market expectations, it may trigger some profit-taking, pushing the index back to test the 101.00 support area.
Editor's Summary : Ahead of the US PCE data release, the overall US dollar market maintained a cautiously optimistic atmosphere. Although the recent decline in oil prices has eased some inflation concerns, the market generally believes that US inflationary pressures have not completely subsided, making it highly likely that the Federal Reserve will maintain a hawkish stance. Current market expectations for an interest rate hike this year have clearly intensified, becoming an important foundation supporting the dollar's strength. In the short term, the PCE data will be a key catalyst determining the dollar's next stage of movement. If inflation continues to exceed expectations, the dollar is expected to further refresh its recent highs; if inflation cools significantly, it may prompt the market to reassess its interest rate hike expectations, bringing some downward pressure.
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