US Dollar Index Climbs Above 97.50 Despite Mixed PMI Data and Fed Uncertainty

US Dollar Index Climbs Above 97.50 on Mixed PMI Data and Fed Outlook

The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, extended its gains to around 97.55 during Friday's Asian trading session. This marks the second straight day of gains for the Greenback, driven by investor caution and mixed US economic indicators.

Mixed US PMI Figures Stir Dollar Volatility

The S&P Global flash PMIs for July delivered conflicting signals on Thursday:

Manufacturing PMI dropped to 49.5 from 52.0, falling below the expected 52.5 and marking a contraction.
Services PMI rose to 55.2 from 52.9, exceeding market estimates of 53.0.
The Composite PMI climbed to 54.6, showing overall economic expansion.

Despite weak manufacturing data, the strength in services is helping to maintain dollar demand, especially amid global economic uncertainty.

Investors Await Durable Goods and FOMC Decision

Later today, attention turns to US Durable Goods Orders for June, which could offer additional insights into economic momentum. However, the bigger focus remains on next week’s FOMC (Federal Open Market Committee) policy meeting.

The Fed is widely expected to hold rates steady as it assesses the inflationary implications of ongoing US-China trade dynamics and recent economic data.

Related Article: How the Fed’s July Decision Could Shift USD Sentiment

According to CME FedWatch Tool, there is nearly a 60% chance the Fed will cut rates by 25 basis points in September, as policymakers maintain a data-driven stance.

Trade Negotiations Add to Market Caution

Traders are also watching for updates on US-China trade talks, expected to resume next week. Progress or setbacks could significantly influence risk sentiment and the USD’s near-term direction.