US Dollar Post-PCE: Slight Strength, Controlled Reaction
The US dollar strengthened slightly following the July PCE release, which met expectations: the headline rose 0.2% m/m (2.6% y/y) and the core rose 0.3% m/m (2.9% y/y). This "inline" data kept the market reaction moderate, with the Dollar Index hovering near 98 and briefly rising slightly by around 0.2%, signaling selective strength against major currencies.
In the G10, EUR/USD held above 1.1660 but remained under pressure, while GBP/USD stabilized above 1.3450 with a relatively subdued response. USD/JPY traded in the 146.8–147.0 range after weakening following softer Tokyo CPI; the PCE release did not alter the pair's short-term trading range. The "tamed" movement reflects that the PCE print did not add any new hawkish surprises, so repositioning flows in FX are likely limited.
Looking ahead, the market still rates an 85% chance of a 25 bps rate cut at the Fed's September meeting, so the dollar's trajectory will depend heavily on subsequent releases—including German CPI and US employment data next week—as well as the dynamics of US Treasury yields. As long as core inflation remains "tepid but manageable," a softening USD versus EUR/AUD scenario with a range-bound USD/JPY remains plausible, although any surprises in core services (supercore) could trigger renewed volatility.
Source: Newsmaker.id
