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25/06/26
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Dollar Dips Ahead of Key US PCE Inflation Data
The US dollar is trading slightly lower as investors await the release of May personal consumption expenditure data, due at 12:30 GMT. The currency’s hesitation comes after a recent advance that pushed the US Dollar Index close to its highest level in more than a year.
The Dollar Index was last near 102, down modestly on the day after reaching 102 on Wednesday. Market attention is now centered on the PCE report, which is widely viewed as the most important inflation indicator for the Federal Reserve. The core PCE measure is expected to rise 3.4% from a year earlier, up from 3.3% in April.
That expected acceleration keeps pressure on the outlook for US monetary policy. Energy-driven inflation has reinforced expectations that the next move from the Fed is more likely to be a rate increase than a cut. Market pricing reflects that shift, with traders now assigning an 82% chance of a rate hike this year and a 42% probability of at least two increases.
Those expectations mark a sharp reversal from the earlier view that the Fed might begin easing policy with two cuts. That earlier outlook was overtaken by renewed inflation concerns following the conflict in the Middle East, which contributed to higher energy prices and broader price pressures.
The core PCE index strips out food and energy to provide a clearer reading of underlying inflation. Because it is the Fed’s preferred gauge, a stronger-than-expected result would likely support the dollar by strengthening the case for a more restrictive policy stance. A softer reading would have the opposite effect and could ease some of the recent upward pressure on the currency.
The Bureau of Economic Analysis will also release monthly figures for personal income and personal spending alongside the PCE report. Together, these data will help shape expectations for the Fed’s next policy steps and determine whether the dollar can extend its recent strength.
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