The dollar held near a one-week high on Thursday after July's PCE inflation print came in hotter than expected, keeping bets on another Fed rate hike alive. Traders are now waiting on Fed Chair Kevin Warsh's Friday keynote at Jackson Hole for direction on where policy goes next.
The U.S. dollar index traded virtually flat at 99.17 on Thursday, holding a one-week high after a 0.3% rise in the previous session. The index was up about 0.3% for the week, clawing back part of last week's 0.8% drop.
Sticky PCE keeps hike bets alive
July's Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, expanded 3.7% year-on-year, matching June's pace but topping the 3.6% Wall Street estimate. Monthly prices rose 0.2%, above forecasts for a 0.1% gain, while core PCE matched projections at 3.3% year-on-year.
Futures markets are pricing in roughly a 60% probability of another 25-basis-point Fed increase before year-end. A separate Reuters report put the odds higher, with traders pricing no change in September but a 70% chance of a hike by December. According to Brown Brothers Harriman's global head of markets strategy Elias Haddad: "the U.S. economy continues to outpace that of other major economies", and he expects rates to stay unchanged through year-end.
Won gains on BOK hike, euro lags
The South Korean won edged 0.3% higher to 1,381 after the Bank of Korea delivered its second straight 25-basis-point rate hike, lifting its benchmark to 3.00% and raising its 2026 growth forecast to 3.3% from 2.6%.
Elsewhere, the euro lingered near a one-week low around $1.1600 despite hawkish remarks from ECB board member Isabel Schnabel. The Australian dollar held near its highest level since early June at $0.7180 on a hot July CPI print. The Canadian dollar, meanwhile, held steady at C$1.3885 per dollar as trade talks with the U.S. broke down.
All eyes on Jackson Hole
Fed Chair Kevin Warsh delivers his inaugural keynote address at the Jackson Hole Economic Policy Symposium on Friday. FX traders will parse his remarks for signals on whether the Fed prioritizes cooling growth or another hike to tame sticky headline inflation.
Sources: Forex News, Economy News
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