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Dollar barely moves after PCE, Aussie rallies as RBA hike debate returns

July core PCE matched consensus at 0.2% m/m and 3.3% y/y, leaving Fed pricing largely unchanged as Fed funds futures keep roughly 63% odds of a September hold.

Reported · Written up by our desk · Major Pairs

The dollar traded with little change after July US personal consumption expenditures inflation landed close to market expectations, limiting scope for a major repricing of Federal Reserve policy. According to Action Forex, core PCE rose 0.2% month over month and 3.3% year over year, both matching consensus, and personal income and spending also beat forecasts, but not enough to reopen the Fed debate. Action Forex said the currency reaction also reflected a “hierarchy” of catalysts, with Australia and oil drawing more attention than the US data. Against sterling and the Swiss franc, the dollar edged higher, while it held broadly steady versus the euro and yen, and stayed weak against a stronger Australian dollar. The Australian dollar strengthened as Australia’s July CPI data revived the Reserve Bank of Australia hike discussion. Action Forex noted that CPI slowed to 3.5% year over year from 3.8%, but remained above the 3.2% consensus, while the RBA’s preferred trimmed mean CPI held at 3.6% against expectations for mild easing. Oil prices moved in the opposite direction as a separate development pulled back the “war premium” in Brent. Action Forex reported Brent extended its decline below $86 after Iran and Oman issued a joint statement related to a proposed temporary navigational arrangement, shifting more of the day’s market focus away from US inflation.

Latest closeBrent $88.59 ▲1.8%

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