US Dollar Index Drops 0.31% as Personal Spending Falls

The US Dollar Index (DXY) has recently experienced a notable decline, falling below the 97 mark for the second time in recent months. This downturn was primarily driven by a significant decrease in US personal spending in May, which was the largest decline since the beginning of the year. This economic indicator dragged down the value of the US dollar, resulting in an intraday decline of 0.31% for the DXY.

The index reached a new low since February 2022, currently standing at 97.48, marking a substantial year-to-date decline. The dollar's recent sell-off has paused temporarily, following its decline during Thursday trading. This leaves the DXY index trading in the low 97s. The dollar index was down slightly on the day at 97.269, holding near its lowest in more than three years. The index is trading below major retracement support in the upper 97s now and threatening long-term bull channel support at 96.5. Technical risks suggest that the dollar could continue to face downward pressure in the near term.

The dollar's decline has been attributed to various factors, including the strengthening of other major currencies such as the euro and the Japanese yen, as well as the British pound trading above $1.3750 for the first time since January. The dollar index was at the 98 mark on Wednesday, halting the slide that tested three-year lows the previous day as markets continued to assess the monetary policy outlook. The US Dollar is trading lower for the sixth consecutive day on the back of Trump's attacks on Powell, which has added to the downward pressure on the dollar.

The recent decline in the US Dollar Index is counter-intuitive given that tariffs typically raise inflation and should strengthen the dollar. However, the current market dynamics suggest that other factors, such as the strengthening of other major currencies and the impact of monetary policy decisions, are playing a more significant role in driving the dollar's value. The dollar's recent sell-off has paused temporarily, but the underlying factors suggest that the dollar could continue to face downward pressure in the near term.