The US dollar index has risen over the past few moments immediately after the release of the PCE price index data.
The U.S. Commerce Department reported on Friday that the core PCE price index rose 2.6 percent from a year ago in July, the same figure as in June, while experts estimated a 2.7 percent increase.
The core PCE price index on a monthly basis came in at 0.2% in July, according to forecasts, the same as the previous reading.
The headline PPE year-on-year index came in at 2.5%, lower than experts’ estimates with a 2.6% increase.
On a monthly basis, it recorded 0.2%, which experts expected, after the index recorded an increase of 0.1% in June.
Fed officials use the PCE measure as the main baseline to measure inflation, which still exceeds the central bank’s long-term target of 2%.
The dollar index rises 0.21% to 101.48 points.
Dollar on track for weekly gains
The dollar is heading for a 0.6% gain this week, which would be its best week since the beginning of April, supported by continued signs of resilience of the US economy, after GDP data showed the economy grew more than initially expected in the second quarter.
However, the greenback is still poised to decline around 2.5% in August, which would be its worst month since November, as traders took into account the start of the Federal Reserve’s interest rate cut cycle.
Speaking at the Federal Reserve’s annual meeting, the Jackson Hole Symposium, last week, Federal Reserve Chairman Jerome Powell acknowledged his recent progress on inflation and said that “it is time to adjust policy.”
Markets saw this as a guarantee of a rate cut at next month’s monetary policy meeting, which will be the first such cut in more than four years.
However, there is still controversy over the size of the cuts as well as the pace of future cuts.
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Inflation in the Eurozone Eases
In Europe, the EUR/USD pair rose 0.1% to 1.1092, after the August Eurozone consumer inflation statement confirmed signs of slowing inflation.
The Eurozone CPI rose 2.2% year-on-year in August, down from 2.6% in the previous month, with a monthly gain of 0.2%.
The European Central Bank began cutting interest rates in June, and a sharp drop in inflation is likely to prompt policymakers to cut them again next month.
The GBP/USD forex pair rose 0.2% to 1.3188, approaching its strongest level since March 2022, supported by expectations that the Bank of England will keep interest rates high for longer than the US and the Eurozone.
The Bank of England cut interest rates by 25 basis points on August 1 to 5%, and financial markets see there are further cuts of 40 basis points by the end of the year.
The yen is close to recent highs
In Asia, the USD/JPY currency pair in Asia settled at 145.01, near its lows recorded in early August, during peak pro-yen trading.
Consumer price index data released from Tokyo showed inflation grew slightly more than expected in August, with core inflation returning towards the Bank of Japan’s annual target of 2%.
The yuan, along with broader Chinese markets, has received support from news that Beijing plans to refinance $5.4 trillion in mortgages – providing a boost to the real estate market, which is at the heart of China’s economic downturn.
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