The US dollar slipped on Thursday as better-than-expected inflation data trimmed the odds of a Federal Reserve interest rate hike in October.
The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, fell 0.11% to 101.26, from an opening of 101.41. The index is still hovering around a three-month high and is poised for a weekly increase of 0.1%.
Year-to-date, the index is up almost 3% and has risen close to 4% over the last 12 months.
A treasure trove of economic data was released in the middle of the trading week.
August’s Personal Consumption Expenditures (PCE) Price Index held steady at 3.4% after the July reading was revised lower to 3.4%.
Economists had penciled in 3.7%.
On a monthly basis, PCE inflation rose 0.3%, up from 0.1% but below the market forecast of 0.4%.
Excluding the volatile energy and food categories, the 12-month core PCE inflation rate was also unchanged at a lower-than-expected 3%. From August to September, PCE inflation edged up 0.2%, a tad below the consensus forecast of 0.3%.
Despite softer inflation numbers, some market watchers believe they are still hot enough to keep the Federal Reserve raising interest rates.
“Net, net, the inflation fire is not burning as hot as markets expected in August, and bond yields are adjusting their sails as investors rethink exactly how many Fed rate hikes might be needed to keep inflation moving back down to target,” Christopher Rupkey, chief economist at FWDBONDS, wrote in response to the latest release, according to CNBC.
In addition to the Fed’s go-to inflation measure, the final estimates for second-quarter GDP, private payrolls, and personal income and spending data were released.
Overall, these numbers presented a so-called Goldilocks picture of current economic conditions. As a result, traders have pushed back their forecasts for rate hikes, penciling in a December policy move.
Meanwhile, the USD/CAD currency pair ticked up 0.07% to 1.4201, from an opening of 1.4192. The EUR/USD was little changed at 1.1344.