United States Dollar Index trades subduedly around 101.50 ahead of US PCE Inflation data

The US Dollar Index trades slightly lower in the countdown to the US PCE Inflation data for May.
Investors expect the US core PCE Inflation to have grown at a faster pace of 3.4% YoY.
The next monetary policy adjustment by the Fed is expected to be on the upside.

Sagar Dua FXStreet

The US Dollar (USD) reflects a subdued performance ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.04%	-0.10%	-0.06%	-0.03%	0.07%	0.16%	-0.14%
EUR	0.04%		-0.03%	0.00%	0.03%	0.14%	0.24%	-0.08%
GBP	0.10%	0.03%		0.02%	0.06%	0.16%	0.28%	-0.06%
JPY	0.06%	0.00%	-0.02%		0.03%	0.12%	0.20%	-0.10%
CAD	0.03%	-0.03%	-0.06%	-0.03%		0.09%	0.20%	-0.14%
AUD	-0.07%	-0.14%	-0.16%	-0.12%	-0.09%		0.09%	-0.20%
NZD	-0.16%	-0.24%	-0.28%	-0.20%	-0.20%	-0.09%		-0.34%
CHF	0.14%	0.08%	0.06%	0.10%	0.14%	0.20%	0.34%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower around 101.52. However, the DXY is close to its over-a-year high at 101.80 posted on Wednesday.

Investors will pay close attention to the US PCE inflation data to get fresh cues regarding the current status of inflation. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% Year-on-Year (YoY) from 3.3% in April.

The US inflation data will likely influence market expectations for the Fed’s monetary policy outlook, which already shows that the next interest rate move by the central bank will be on the upside due to elevated energy prices-driven high inflation.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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