PCE Report Aligns with Expectations
The PCE price index, the Fed’s preferred inflation gauge, rose 0.1% month-over-month and 2.5% year-over-year in June, matching consensus estimates. Core PCE, excluding food and energy, increased 0.2% monthly and 2.6% annually, also in line with projections. These figures suggest inflation is gradually cooling, though still above the Fed’s 2% target.
Economic Indicators Paint Mixed Picture
While the PCE data supports the case for monetary easing, other economic signals remain mixed. Q2 GDP growth exceeded expectations at 2.8%, indicating economic resilience. However, recent manufacturing data showed contraction, highlighting potential vulnerabilities in the industrial sector.
Gold Gains Ground Amid Dollar Weakness
Gold (XAU/USD) has capitalized on the dollar’s retreat, adding to its gains following the PCE report. The precious metal is now trading at its intraday high, benefiting from increased safe-haven demand and expectations of a less hawkish Fed. Despite this recent strength, gold remains lower for the week overall.
Market Forecast
The outlook for the U.S. Dollar Index appears bearish in the short term. With the PCE data supporting the narrative of a potential Fed rate cut, the greenback may face continued downward pressure. This environment could provide further support for gold, which tends to benefit from a weaker dollar and lower interest rate expectations. Traders should closely monitor next week’s Federal Reserve meeting for additional insights into the monetary policy outlook and its potential impact on both the dollar and gold markets.