The U.S. dollar eased on Thursday after hitting a 13-month high, pausing its advance as traders shifted focus to a heavy slate of economic data that could cement expectations for the Federal Reserve’s first interest rate increase since the easing cycle began. The US Dollar Index (DXY) retreated from Wednesday’s 101.80 peak but held firmly above 101.50, reflecting a cautious market mood ahead of the May core Personal Consumption Expenditures (PCE) price index release.
The Bureau of Economic Analysis is set to publish the core PCE data—the Fed’s preferred inflation gauge—alongside personal spending and income figures. Economists forecast a 0.3% month-over-month rise in core PCE, with the annual rate expected to stay above the central bank’s 2% target. Persistent price pressures have already prompted a shift in market pricing, with the CME FedWatch Tool showing a probability above 60% for a quarter-point rate hike at the September 16–17 FOMC meeting.
The week’s data deluge also includes the final revision to first-quarter GDP, durable goods orders, and weekly jobless claims. Any upside surprise in inflation or growth could bolster the case for tightening, pushing bond yields and the dollar higher. The 2-year Treasury yield has already climbed to multi-month highs in anticipation.
Geopolitical tensions added to the defensive tone. Iran’s Revolutionary Guard rejected a shipping route through the Strait of Hormuz, warning of danger for vessels using it, while Israel’s defense minister said the military would remain in southern Lebanon. These developments kept risk appetite subdued even as equity futures pointed to a firmer open.
For crypto markets, a September rate hike would mark a significant pivot. Higher interest rates typically strengthen the dollar and dampen demand for risk assets, potentially weighing on Bitcoin and the broader digital asset space. If the PCE data confirms stubborn inflation, the path toward tighter policy could become clearer, reinforcing headwinds for speculative investments in the near term.
