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US Inflation Nudges Lower, US Dollar (DXY) Also Slips on Drifting Rate Expectations

US Inflation Nudges Lower, US Dollar (DXY) Also Slips on Drifting Rate Expectations

Nick Cawley, Senior Strategist

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US Dollar (DXY) Price, Chart, and Analysis

  • US core PCE nudge 0.1% lower to 4.6% in February.
  • The US dollar slips but price action is muted for now.
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Inflation in the US is falling, according to the latest data from the Bureau of Economic Analysis(BEA). Core PCE (ex-energy and food) fell to 4.6% in February, compared to 4.7% in January, while the PCE price index fell to 5.0% compared to a revised 5.3% in January. The BEA PCE data is the Federal Reserve's favored measure of inflation.

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The US dollar slipped post-release while risk markets gained a small bid ahead of the opening bell in the US. Today’s release will please the Fed in their fight against stubbornly high inflation and may give them a chance to pause hiking interest rates. The market is currently pricing in a near 50/50 chance of just one more 25bp rate hike before the central bank pauses. The Fed is then seen cutting rates at the end of Q3 going into Q4.

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The US dollar index (DXY) slipped around 15 pips after the release and is now less than half-a-point away from last Thursday’s multi-week low (101.50).

US Dollar Index Daily Chart

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Charts via TradingView

What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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