US Dollar Index (DXY) steadies above 98.30 ahead of US inflation figures

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The US dollar consolidates gains against its main peers on Friday, buoyed by a string of upbeat US macroeconomic releases.

The Dollar remains steady near 150.00 against the Yen ahead of the US PCE Prices Index release.
A batch of unexpectedly strong US macroeconomic figures boosted the US Dollar on Thursday.
The Japanese Yen has remained on its back foot on Friday, following soft Tokyo CPI data.

The US dollar consolidates gains against its main peers on Friday, buoyed by a string of upbeat US macroeconomic releases. The USD Index, which measures the value of the Greenback against a basket of currencies, has been trading right below three-week highs at 98.60 with downside attempts contained at 98.30, on track for a 0-85% weekly gain.

The US Commerce Department revised the second quarter’s GDP growth to 3.9% from the previously estimated 3.3% and up from a 0.5% contraction in the first quarter. Beyond that, US jobless claims dropped to their lowest levels since July, and Durable Goods Orders bounced up unexpectedly.

These figures curbed investors' expectations of immediate rate cuts by the Federal Reserve, before some of the central bank’s committee members highlighted their wide divergences on the near-term monetary policy path.

Chicago Fed President Austan Goolsbee showed concerns about lowering rates too fast, based solely on payroll growth. San Francisco President Mary Daly was open to “a little bit” more rate cutting, while Triump’s last appointment, Stephen Miran, continued pressing for a jumbo rate cut next month.

In this context, investors are looking at the US PCE Prices Index for more clues about the rate path. Headline inflation is expected to have ticked up to a 2.7% yearly rate from 2.6% in July, while the core inflation is seen steady at 2.9%.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.