US Dollar Index slides towards 102.00 despite hawkish Fed talks, focus on inflation

• US Dollar Index seesaws around weekly low, eyes three-week downtrend.
• Market’s optimism about banking sector, less confidence in the Fed’s further rate hike capacity weigh on DXY.
• US Core PCE Price Index will be crucial for US Dollar bull’s return.

US Dollar Index (DXY) prods weekly low around 102.20 as the greenback bears ignore hawkish Federal Reserve (Fed) rhetoric amid a risk-on mood during early Friday. In doing so, the greenback’s gauge versus the six major currencies prepares for the third consecutive weekly loss.

That said, Federal Reserve Chairman Jerome Powell joins three other Fed Officials to back further rate hikes on Thursday, citing the need to tame the inflation woes.

"Inflation remains too high, and recent indicators reinforce my view that there is more work to do to bring inflation down to the 2% target associated with price stability," Federal Reserve Bank of Boston leader Susan Collins said in remarks to a gathering of the National Association for Business Economics per Reuters.

Following her was Minneapolis Fed President Neel Kashkari who said, “We have to bring down inflation.”

On the same line was Richmond Fed President Thomas Barkin saying that if inflation persists, we can react by raising rates further.

Not only the rate concerns but the hopes of a secured banking system also favored the sentiment and exerted downside pressure on the DXY, especially amid mixed US data. That said, final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP), also known as the Real GDP, marked an easy Annualized growth number of 2.6% versus 2.7% previous forecasts. It’s worth noting that the Q4 Personal Consumption Expenditure (PCE) Prices matched 3.7% QoQ forecasts and prior while the Core PCE figure grew to 4.4% QoQ versus 4.3% expected and prior. Moving on, the Weekly Initial Jobless Claims rose to 198K for the week ended on March 25 versus 191K prior and 196K market forecasts. 

Meanwhile, fears emanating from China, Russia and North Korea allow the DXY bears to take a breather. China's Taiwan Affairs Office threatened retaliation over Taiwan President Tsai Ing-wen's visit to the US on Wednesday. Additionally, China's Premier Li Qiang recently said that the economic situation in March is even better than in January and February. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US.

Elsewhere, Wall Street closed positive but the yields grind higher and weigh on the US Dollar.

Moving on, China NBS PMIs for March will precede the Eurozone Harmonised Index of Consumer Prices (HICP) for March and the Fed’s favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for February, to direct DXY moves.

Technical analysis

US Dollar Index grinds lower within a descending triangle formation, currently between 101.80 and 102.60.