US Dollar Index extends the rally to new peaks near 103.70, looks to data

• DXY advances to fresh 5-year highs well north of 103.00.
• US yields reverse part of Wednesday’s rebound.
• Advanced Q1 GDP figures, weekly Claims next of note in the docket.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, keeps pushing higher and reaches an area last seen mor than five years ago around 103.70 on Thursday.

US Dollar Index looks to data, Fed

The index so far advances for the sixth consecutive session on Thursday, or nearly 4% since weekly lows in the 99.80 region recorded on April 21.

The acute climb in the dollar comes almost exclusively in response to firmer conviction that the Federal Reserve will embark on a more aggressive tightening cycle starting as soon as in May and with an already telegraphed 50 bps rate hike.

Daily gains in the buck comes against the backdrop of a corrective knee-jerk in US yields along the curve, while the steady stance from the BoJ and the subsequent depreciation of the Japanese yen also collaborates with the upbeat note in DXY.

In the US data space, the first revision of the Q1 GDP will take centre stage seconded by usual weekly Claims.

What to look for around USD

The dollar picks up extra pace and quickly surpasses the key 103.00 barrier in quite a convincing fashion for the first time since January 2017. Persevering risk aversion, geopolitics and the bounce in US yields all collaborate with the upside momentum in the buck. In the meantime, the likelihood of a tighter adjustment to the Fed’s monetary conditions continues to be the main driver behind the sharp move higher in the index in past sessions, which also appears reinforced by the current elevated inflation narrative and the solid health of the labour market.

Key events in the US this week: Advanced Q1 GDP Growth Rate, Initial Claims (Thursday) – Core PCE, PCE, Final Consumer Sentiment, Personal Income/Spending (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is advancing 0.18% at 103.17 and the breakout of 103.69 (2022 high April 28) would open the door to 103.82 (2017 high January 3) and finally 104.00 (round level). On the other hand, initial contention emerges at 99.81 (weekly low April 21) seconded by 99.57 (weekly low April 14) and then 97.68 (weekly low March 30).