The dollar held broadly steady against the euro on Wednesday after July's core PCE inflation matched consensus, leaving existing Federal Reserve interest rate expectations intact. Traders now turn to Fed Chair Kevin Warsh's Friday remarks at Jackson Hole for the next real catalyst.
Dollar traded mixed in early US hours after July's Personal Consumption Expenditures report landed almost exactly where markets expected. Core PCE rose 0.2% month-on-month and 3.3% year-on-year, both matching consensus, while headline inflation came in only slightly firmer than forecast. Personal income and spending also beat expectations, but not by enough to shift the policy debate.
Fed Pricing Stays Unchanged
Because the data confirmed rather than surprised, rate expectations barely moved. Fed funds futures continue to show around 63% odds of a September hold, while odds of at least one hike by year-end stand near 70%. The dollar strengthened modestly against sterling and the Swiss franc, but held broadly steady against the euro and yen, and stayed weak against a much stronger Australian dollar.
That pattern left the greenback in the middle of Wednesday's currency ranking. The session's performance ran AUD > JPY > USD > EUR > GBP > CAD > NZD > CHF.
Jackson Hole Now the Focus
Attention has shifted away from Wednesday's in-line data toward Warsh's Friday appearance at Jackson Hole. His remarks on inflation, Fed independence and the Treasury-Fed relationship carry more potential to move the dollar and cross-asset markets than this week's inflation print did.
Source: ActionForex
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