- The US Dollar Index trades with some gains near 99.30 on investor caution.
- Trump targets Fed as GDP disappoints and tariffs bite.
- PCE inflation slows but remains sticky, keeping Fed watchers alert.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, hovered near 99.30 on Wednesday as investors remained cautious ahead of the Nonfarm Payrolls and inflation data later in the week. A contraction in US Gross Domestic Product and conflicting inflation signals are keeping market participants on edge.
Daily digest market movers: US Dollar awaits confirmation as economy stumbles
- The United States economy contracted 0.30% in Q1 2025, according to the Bureau of Economic Analysis, missing expectations for 0.40% growth.
- The Core Personal Consumption Expenditures (PCE) Price Index rose 2.60% YoY in March, down from 3.00% in February, aligning with analyst forecasts.
- Personal Income and Personal Spending rose 0.50% and 0.70%, respectively, in March, exceeding expectations and hinting at resilient consumption.
- Private sector job creation slowed sharply to 62,000 in April, the ADP report showed, well below the 108,000 forecast.
- President Donald Trump attacked Federal Reserve Chair Jerome Powell during a Detroit rally, claiming greater knowledge of interest rates.
- Trump signed an executive order easing tariffs on car parts, aimed at reducing inflationary pressure on auto-related goods.
- The broader market reaction to GDP and PCE data remained muted as the US Dollar Index held above 99.30.
- The GDP Price Index rose 2.30% in Q1, below the 2.40% expected, highlighting tempered inflationary momentum across the economy.
- Consumer uncertainty and tariff-related anxiety continue to weigh on hiring, according to comments by ADP Chief Economist Nela Richardson.
- Investors brace for Friday’s Nonfarm Payrolls and ISM Manufacturing PMI, which could significantly impact Fed rate expectations.
Technical analysis: DXY remains range-bound on Wednesday
The DXY trades around 99.40, posting a modest 0.21% gain on the day while remaining range-bound between 99.14 and 99.56. The Relative Strength Index (RSI) sits at 37.42, while the Moving Average Convergence Divergence (MACD) is shifting to a neutral-to-bullish bias. Still, downward pressure persists as the 20-day (100.55), 100-day (105.57), and 200-day (104.46) Simple Moving Averages (SMAs) all generate sell signals.
Bearish confirmation is reinforced by the 10-day (99.59) and 30-day (101.32) Exponential Moving Averages (EMAs). The Williams Percent Range (14) at -71.47 and the Stochastic RSI Fast (3, 3, 14, 14) at 79.79 remain in neutral zones. Support is seen at 99.28 and 99.19, while resistance stands at 99.59, 100.49, and 100.55.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.