Dollar Forex Market Rebounds Ahead of Inflation Data

• Cautious Mood Returns Ahead of PCE Inflation
• Euro & Pound Under Pressure 
• Stocks Steady to End Quarter

The US Dollar forex market has shown resilience in trading today as it bounces back stronger against other major currencies having lost some ground to a more optimistic market through the week. The Dollar has battled back against both the Euro and the Pound which have been trading under pressure in the early hours as the market looks toward the key PCE inflation figures to come later in the day. The move will deflate both currencies which were starting to show more strength themselves amid Russia-Ukraine peace negotiations. These have remained fruitless. Meanwhile, Wall Street is quiet ahead of the final trading day of what has been a wild quarter.

Inflation Figures Key to Market Direction

The major data release of the day that will determine how it goes for those forex trading the Dollar and other currencies, is the PCE inflation number from the US. This is due later in the day and is known to be the preferred gauge of inflation for Jerome Powell and the Federal Reserve. Analysts expect this number to rise to 5.5% on a yearly basis. This would be a move up from 5.2% in January.

A miss on this expectation in either direction would be almost certain to impact prices. A higher reading could set speculation over the Fed's future interest rate moves alight again. This would likely result in another flight to safety and increasing Dollar strength. A miss to the downside would similarly have an opposite impact and perhaps lead to a weaker Dollar finishing the day.

Pound and Euro Struggling to Hold Gains

Both the Pound and Euro have performed well in recent days with forex brokers as they continue to recover from long-term low positions against an extremely strong Dollar. This positive momentum has stalled today though as hopes of a Russia-Ukraine Peace deal appear to have been overestimated.

PCE inflation figures to be released are also causing traders to revert to a more cautious outlook. At the time of writing, the Euro was dropping back toward 1.11 which still leaves it in a relatively strong position compared to recent weeks. Sterling traded at just above 1.31.

Wall Street Flat as Quarter Closes

Early trading on Wall Street remained quiet as what has been a rollercoaster quarter draws to a close. The Fed interest rate hike uncertainty, continuing battle with COVID-19, and the Russian war on Ukraine have all been major factors that rocked markets throughout a tumultuous three-month period. All major indices are still well below where they had started the year. 

The Dow Jones and S&P 500 both sit around 3% below where they started the quarter, while the NASDAQ is quite a bit lower at around 7%. With that said, this has been improved by a strong March for all indices as traders hope a corner has been turned.