US Dollar Index advances to reclaim five-year high at 103.30, US Core PCE eyed

• The DXY has reclaimed 103.00 amid broader strength in the Fx domain.
• The advancing odds of an extremely tight monetary policy by the Fed are strengthening the DXY.
• US Core PCE and GDP will remain in focus.

The US dollar index (DXY) has rebounded sharply from 102.83 as indicators turned oversold on the smaller timeframes and investors went along with broader strength in the concerned index. The DXY is marching towards the latest five-year high at 103.30 firmly. In a while, it is worth noting that the DXY is printing fresh highs after minor pullbacks backed by progressing odds of a jumbo rate hike by the Federal Reserve (Fed).

Expectations of a 50 basis point (bps) have been bolstered after Fed chair Jerome Powell dictated that a rate hike by 50 bps is on the table. Well, much confident tone from the highest rank of the Fed is sufficient to claim certainty of an aggressive hawkish stance from the central bank in May.

US Core PCE and GDP

Next trigger that will guide investors for the likely direction of the DXY is the release of the US Core Personal Consumption Expenditure (PCE) on Thursday. The core PCE is seen at 5.4% against the prior print of 5%. Higher core PCE reading will bolster the odds of a hawkish Fed guidance. Along with that, US Gross Domestic Product (GDP) will also release on Thursday. The quarterly and yearly GDP are seen at 7.3% and 1.1% respectively.

Key events this week: Core PCE, GDP, Initial Jobless Claims, Michigan Consumer Sentiment Index (CSI), and Personal Income.

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, Bank of Japan (BOJ) interest rate decision, Swiss National Bank (SNB) chairman Thomas J. Jordan’s speech.