The U.S. dollar traded within a tight range on Tuesday as traders positioned ahead of Wednesday’s personal consumption expenditures data and Friday’s annual Jackson Hole conference, where Federal Reserve Chairman Kevin Warsh is scheduled to speak.
The ICE U.S. Dollar Index, which tracks the greenback against six major peers, was up 0.1% at 99.15, leaving it on track for its largest daily gain since August 6. The euro fell 0.2% to $1.1653, while the British pound declined 0.4% to $1.3593, marking its steepest single-day drop since late July.
The dollar’s resilience followed a report showing U.S. personal consumption expenditures rose 3.7% in the 12 months through July, matching June’s increase and exceeding a 3.6% estimate from a Reuters poll. Month-over-month, the PCE price index increased 0.2%, outpacing forecasts for a 0.1% rise and rebounding from a 0.1% decline in June. Meanwhile, second-quarter GDP growth was confirmed at 1.5%, unchanged from the initial reading.
Personal income climbed 0.4% in July, topping expectations for a 0.2% gain, though consumer spending—a driver of over two-thirds of U.S. economic activity—was flat after a 0.3% increase in June. Markets are now pricing a 40.1% chance of a 25-basis-point Fed rate hike at the September meeting, up from roughly 36% before the data release.
Elsewhere, the Canadian dollar weakened 0.2% to C$1.387 per dollar after Ottawa imposed retaliatory tariffs on approximately $20 billion of annual U.S. imports, while the Japanese yen slipped 0.1% to 159.37 per dollar. The dollar’s advance came despite a Reuters report citing European Central Bank policymaker Isabel Schnabel as saying the ECB’s restrictive stance remains appropriate, tempering expectations for imminent policy easing.
Analysts cautioned against overinterpreting the moves, with George Vessey, lead FX and macro strategist at Convera, noting that the inflation data did not provide a clear dovish or hawkish signal. "Those details weren’t strong enough to hand the hawks a clear win," Vessey said. "We’ve got loads of competing narratives driving FX at the moment, so it’s hard to have a strong conviction in either direction right now."
