The U.S. dollar index advanced 0.3% to 99.16 on Wednesday, supported by cautious positioning ahead of the release of July’s core Personal Consumption Expenditures (PCE) inflation data. The greenback held gains against most major peers, with the USD/JPY pair up 0.1% at 159.34, remaining below the psychologically significant 160 level. The EUR/USD pair slipped 0.2% to $1.651, while the USD/CAD rate rose 0.3% to $1.3877.
Investors are closely monitoring the core PCE reading, the Federal Reserve’s preferred inflation gauge, which is expected to show a 0.2% month-on-month increase and a 3.3% year-on-year rise in July. The annual increase remains above the Fed’s 2% target, reinforcing expectations that policymakers may delay rate cuts until later in the year. CME FedWatch data indicates a 64% probability of the Fed holding rates steady at its September meeting, up from 60% the prior day.
The U.S. dollar’s weekly decline of nearly 1% has been partly offset by today’s gains, as traders balance positioning ahead of Friday’s Jackson Hole economic symposium. Fed Chair Kevin Warsh is scheduled to deliver a keynote address, which could provide further signals on the central bank’s policy trajectory. Earlier this month, the U.S. national debt surpassed $40 trillion, adding to fiscal concerns that may influence monetary policy deliberations.
In Australia, the local dollar climbed 0.1% to $0.7172 after July’s consumer price index rose 0.6% month-on-month and 3.5% year-on-year, a deceleration from June’s 3.8% reading. The data suggests inflationary pressures are easing, though they remain elevated relative to the Reserve Bank of Australia’s target range. The RBA has signaled a cautious approach to policy adjustments amid mixed economic signals.
U.S. durable goods orders for July increased 1.1%, outpacing expectations of a 0.4% rise, while second-quarter real GDP growth was confirmed at 1.5%, unchanged from the prior estimate. The mixed economic backdrop has contributed to a cautious tone in currency markets, with traders awaiting further clarity on inflation trends and central bank policy paths.
