The dollar index held above 104 on Monday, hovering near its highest levels in ten weeks, supported by strong US economic data that bolstered expectations of further policy tightening and news that a tentative debt ceiling deal was reached over the weekend. Data released on Friday showed that PCE prices in the US, the Federal Reserve’s preferred inflation gauge, rose more than expected in April.
US consumer spending and durable goods orders also exceeded forecasts in April,indicating that the US economy remains resilient in the face of higher interest rates. Markets are now pricing in a higher chance that the Fed will deliver another 25 basis point rate hike in June, a shift from previous expectations for a pause in the tightening cycle. Meanwhile, President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle over the weekend to suspend the $31.4 trillion debt limit and expressed confidence that both Democrats and Republicans will support the deal.