Key points:
- US dollar calm before the storm.
- Forex markets anticipate PCE data.
- Fed’s favored inflation metric looms today.
US dollar kept its cool as forex traders moved to the edge of their seats, fingers on the buy or sell — volatility coming.
- The US dollar index
DXY was hugging the flatline early Friday as currency traders were bracing for some volatility later in the day. The gauge, measuring the dollar’s strength against a basket of six top currencies, floated near 104.30 to start the session — unchanged for the week even after US gross domestic product on Thursday showed the US economy expanded by 2.8% in the second quarter. - Today’s data, however, carries the potential to stir up forex dealmaking. The personal consumption expenditures index, or PCE, is slated for release. It’s the Federal Reserve’s preferred measure of inflation because it strips out price changes in more volatile items, such as food and energy. The US central bank’s inflation north star is expected to show prices grew 2.4% in June, on an annualized basis.
- If materialized, the figure will bring financial markets closer to their first interest rate cut. Fed policymakers have said that they’re looking for more “good data” before lowering borrowing costs. A cool inflation printout will complement a softening job market and add to a string of recent positive news from the US economy. Elevated fluctuations in the forex corner can be expected — prepare your trades!
