US Dollar Index (DXY) advances to weekly top around 99.80; lacks bullish conviction

• The USD scales higher for the second straight day on the back of Tuesday's upbeat US data.
• US fiscal concerns and Fed rate cut bets might keep a lid on any further USD appreciation.
• Traders might also opt to wait for the key release of the FOMC meeting minutes later today.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, gains positive traction for the second consecutive day on Wednesday and moves further away from the monthly low touched earlier this week. The momentum lifts the index to the 99.80 region, or a fresh weekly top during the Asian session, though it seems to lack bullish conviction.

The upbeat US macro data released on Tuesday helped calm recession fears, which, in turn, is seen as a key factor acting as a tailwind for the DXY. In fact, the US Census Bureau reported that Durable Goods Orders declined by 6.3% in April, marking a stark turnaround from the 7.6% increase (revised from 9.2%) in the previous month. The reading, however, was better than the market expectation for a decrease of 7.9%. Adding to this, orders excluding transportation rose 0.2% during the reported month.

Furthermore, the Conference Board's US Consumer Confidence Index rebounded sharply after a prolonged fall since December 2024 and jumped to 98 in May. This represents a 12.3 points increase from 85.7 in April, marking the biggest monthly rise in four years amid an improving outlook for the economy and the labor market on the back of the US-China trade truce. This, in turn, inspires the USD bulls, though US fiscal concerns and dovish Federal Reserve (Fed) expectations might cap any further gains.

US President Donald Trump's dubbed "Big, Beautiful Bill" was passed in the lower house last week and will be voted on in the Senate this week. The sweeping tax cuts and spending bill would add an estimated $4 trillion to the federal primary deficit over the next decade and worsen the US budget deficit. Moreover, traders ramped up their bets for at least two 25 basis points (bps) interest rate cuts by the Fed this year following the release of softer-than-expected US inflation figures earlier this month.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before placing aggressive USD bullish bets and positioning for any further gains. Traders might also opt to wait for more cues about the Fed's rate-cut path. Hence, the focus will remain glued to the release of FOMC meeting minutes. This week's US economic docket also features the Prelim Q1 GDP print and the Personal Consumption Expenditure (PCE) Price Index on Thursday and Friday, respectively.