The US Dollar is currently hovering around a dollar index of 97.9, having paused its recent decline. Investors are awaiting the upcoming PCE price index, a key inflation gauge monitored by the Federal Reserve, for further insights into future policy decisions. The dollar is on track for a significant loss in August, driven by increased market expectations of easing from the Federal Reserve.
- The dollar index hovered around 97.9 on Friday.
- Investors await the PCE price index for policy direction.
- Core PCE is projected to rise 2.9% year-on-year in July.
- The US economy grew slightly faster in Q2.
- Fed Governor Waller signaled support for starting rate cuts next month.
- The dollar index is set to lose more than 2% in August.
- Markets are pricing in an 86% chance of a 25 basis-point cut in September.
- The greenback posted sharp monthly declines against the euro, sterling, and yen.
The implications for the dollar are bearish in the short term. Economic data and statements from Federal Reserve officials suggest a potential shift towards looser monetary policy, which is weakening the dollar’s appeal to investors. The market’s anticipation of rate cuts is putting downward pressure on the currency, and this trend may continue if inflation data supports the case for easing.