• The DXY is pulling back from Thursday’s cycle highs near 97.70.
  • Global attention remains focused on events in Ukraine.
  • PCE, Durable Goods Orders, U-Mich Index next to be noted on file.

The greenback, in terms of US Dollar Index (DXY)trades with no clear direction around the neighborhood of 97.00 at the end of the week.

The US Dollar Index focuses on geopolitics and risk trends

After fresh cycle highs near 97.80 on Thursday, the index triggered a downward correction and is now struggling for direction in the 97.00 area on Friday.

The greenback’s sharp rise to levels last seen in June 2020 came in response to the violent resurgence in risk aversion sentiment after Russia attacked Ukraine early on Thursday.

US yields, meanwhile, are trading with modest losses on Friday after managing to erode losses on Thursday amid growing inflows into safer assets like bonds.

The dollar’s pullback from recent highs was also sponsored by Fedspeak, which now favors a rate cut at the March Fed meeting and a more gradual start to the rate hike and QT in light of the lingering geopolitical concerns. On that score, and according to CME Group’s FedWatch tool, the probability of a 25 basis point interest rate hike is now close to 80%, similar to levels seen a week ago.

Later in the US data space, inflation figures tracked by the PCE will take center stage, supported by durable goods orders, pending home sales, personal income/spending and printing. final consumer sentiment for the current month.

What to look for around the USD

The appetite for safer assets continues to support the dollar and keeps the index on a positive base due to the deteriorating geopolitical scenario. The constructive USD view remains underpinned by the current high inflation rhetoric and the likelihood of a more aggressive start to the Fed’s normalization of its monetary conditions. Looking further ahead, recent hawkish messages from the BoE and the ECB may undermine the USD’s expected rise over the next few months.

Key events in the United States this week: PCE, Durable Goods Orders, Personal Income/Expenses, Pending Home Sales, End Consumer Sentiment (Friday).

Significant problems on the rear boiler: Escalation of geopolitical effervescence in the face of Russia and China. The trajectory of Fed rates this year. Trade conflict between the United States and China under the Biden administration.

Relevant US Dollar Index Levels

Now the index gains 0.08% to 97.12 and a break above 97.73 (24th February 2022 high) would open the door to 97.80 (30th June 2020 high) and finally to 98.00 (round level). On the other hand, the next downside barrier emerges at 96.03 (55-day SMA) followed by 95.67 (weekly low from February 16) and then 95.17 (weekly low from February 10).