Did weaker DXY after PCE data offset the GDP-driven dollar strength?

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Weaker DXY After PCE Data Did Not Fully Offset GDP-Driven Dollar Strength

Following the release of US economic data, the US Dollar Index (DXY) experienced a decline after the Personal Consumption Expenditures (PCE) inflation data was published. However, this weakening did not entirely counteract the upward pressure on the dollar stemming from stronger-than-expected first-quarter Gross Domestic Product (GDP) figures. The DXY fell by 0.18 per cent to 101.431 points subsequent to the PCE announcement, which came in line with market expectations at 4.1 per cent in May.
GDP Growth Exceeds Expectations

The US reported a first-quarter GDP growth rate of 2.1 per cent, surpassing the consensus forecast of 1.6 per cent. This robust economic performance generally provides a supportive environment for a currency, as it indicates a healthy and expanding economy, which can attract foreign investment and boost demand for the currency. The stronger-than-expected GDP figures were cited as a reason for the initial strengthening of the US dollar.
PCE Data Limited Dollar Rally

Subsequent to the GDP announcement, the release of the PCE inflation data showed a rate of 4.1 per cent for May, which was in line with market expectations. While not negative, this data did not provide an additional impetus for dollar appreciation. In fact, the DXY's subsequent fall suggests that the PCE data, particularly in the context of potentially anaemic consumer spending growth implied by sub-one per cent quarterly growth, introduced some caution among investors, leading to a partial retracement of earlier dollar gains.
Geopolitical Factors Limited Ringgit's Decline

Concurrently, external factors also influenced the Malaysian ringgit's performance. The reopening of the Strait of Hormuz contributed to an improvement in global risk appetite. Generally, an increase in risk appetite tends to see investors move away from safe-haven assets like the US dollar and towards riskier emerging market currencies, which could have provided some support to the ringgit. This shift in risk sentiment played a role in limiting the ringgit's overall depreciation against the dollar, despite the dollar's underlying strength from the GDP data.

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Did weaker DXY after PCE data offset the GDP-driven dollar strength?

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