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Peter Davis

An writer at FOMOdrive

  • Oct 27, 2023
  • 2 min read

The US dollar came under pressure after the release of the Fed's key inflation indicator

After the Core PCE Price Index data was released, the US dollar weakened.

After three days of increases, the dollar index dropped.

For the past 2.5 years, the US Federal Reserve's key inflation indicator has been at its minimum.

The data was in line with expectations.

On Friday, the Bureau of Economic Analysis (BEA), an agency of the US Commerce Department, reported that the Core PCE Price Index (the US Federal Reserve's preferred measure of inflation) excluding food and energy had risen 0.3% from the previous month in September, which coincided with expectations. The BEA is responsible for preparing statistical data on the US economy.

The Core PCE Price Index saw an annual growth rate of 3.7% in September, which was in line with expectations. This marks the lowest annual growth rate since May 2021.

Reuters notes that the dollar is showing growth at the end of the week, bolstered by strong economic growth data in the United States, which bolsters the case for raising interest rates.

Data released on Thursday showed that the US economy grew at its quickest rate in almost two years during the third quarter. This was due to higher wages, which were a result of the tight labor market, and this in turn has helped to increase consumer spending.

The Fed's added assurance that rates will remain high for an extended period of time has generally caused the dollar to appreciate.

Wells Fargo predicts that the pound and euro will significantly weaken by early 2024 due to a strengthening dollar and pessimistic outlooks for the economy. They anticipate that GBP/USD will drop to around 1.16 and EUR/USD to around 1.02.

According to Nomura, the euro is expected to depreciate to 1.02 by the end of the year due to several catalysts.

Commerzbank expects that in 2024, the ECB will not have the capacity to reduce rates, and the euro will become stronger.

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