DXY Dollar Index remains below 104.00 as investors wait for new catalysts

• The DXY Dollar Index is trading lower amid dollar weakness.
• The US labor market remained strong in February.
• Figures for fourth quarter GDP growth and the underlying Personal Consumption Expenditure (PCE) Price Index will be released next week.

The DXY Dollar Index, a measure of the strength of the US Dollar (USD) against a basket of six currencies, falls below the 104.00 level during the early hours of the European session on Friday. The DXY index is trading on a softer tone as investors await new catalysts on when the Federal Reserve (Fed) will begin cutting interest rates. At the time of writing, the DXY index is trading at 103.92, losing 0.02% on the day.

Earlier Friday, Fed Governor Christopher Waller said recent stronger-than-expected inflation data validates Fed Chair Jerome Powell's careful risk management approach and that the central bank will not is rushing to start cutting interest rates, as the Fed wanted to wait longer before having enough confidence that the start of rate cuts will keep us on track for 2% inflation.

Optimism from the manufacturing PMI and jobs data failed to boost the DXY Dollar Index. The US Department of Labor revealed on Thursday that Initial US Jobless Claims for the week ending February 17 fell to 201,000 from 213,000 the previous week, while Claims Continued decreased to 1,862,000, below the estimate and the previous week.

Elsewhere, the preliminary US Manufacturing Purchasing Managers' Index (PMI) rose to a 17-month high of 51.5 in February from 50.7 in January, above the market consensus of 50.5. For its part, the Services PMI fell to 51.3 in February, compared to the previous 52.5, below the forecast of 52.0 points.

Apart from this, rising tensions in the Middle East also support the DXY index. Houthi rebels launched two missiles at another UK-registered cargo ship in the Gulf of Arden. This comes as the group upgrades its military and defense capabilities to continue attacking ships in the Red Sea. New conflicts in the Middle East could lift traditional currencies like the dollar.

Next week, markets will focus on the annualized US Gross Domestic Product for the fourth quarter, which is forecast to remain stable at 3.3%. Additionally, the underlying Personal Consumption Expenditure (PCE) Price Index and February ISM Manufacturing PMI will be released. Investors will look at this data and look for opportunities around the DXY Dollar Index.