Inflation in the US, as measured by the headline Personal Consumption Expenditures (PCE) Price Index, rose by 2.2% year-over-year in August according to the US Bureau of Economic Analysis (BEA) report. This was slightly below market expectations. The core PCE Price Index, excluding food and energy, increased by 2.7% over the same period, aligning with market consensus. The monthly growth in the core PCE Price Index was 0.1%, below expectations.
Market reaction to the PCE data saw little attention from the US Dollar (USD), with the US Dollar Index (DXY) remaining on the back foot and adding to Thursday’s losses around 100.40. The US Dollar showed strength against the British Pound in comparison to other major currencies.
The release of the significant Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, is anticipated by the United States Bureau of Economic Analysis (BEA). While this PCE inflation data may influence the short-term trajectory of the US Dollar (USD), it is unlikely to alter the Fed’s interest-rate path.
The core PCE Price Index is projected to rise by 0.2% in August, aligning with July’s figures. This measure plays a crucial role in shaping market expectations for the Federal Reserve’s interest-rate outlook. Market forecasts suggest a downward trend in the headline PCE, with a monthly increase of 0.1% and an annual increase of 2.3%.
The table showing the percentage change of the US Dollar against major currencies reflects the current state of the market. Analysts predict that core PCE inflation will likely stay under control, while headline PCE inflation is expected to show a soft increase. Market participants have already priced in further easing and are awaiting next week’s Nonfarm Payrolls amidst the Fed’s focus on the labor market.
In conclusion, the PCE inflation report is anticipated to have minimal impact on the US Dollar’s price action given the current market sentiment. Analysts suggest potential upside for the EUR/USD pair, with key resistance levels to watch. The core PCE Price Index plays a significant role in shaping market expectations for the Federal Reserve’s interest-rate outlook.
