USD Bulls Pause After In-Line PCE Data, Falling Oil Prices
The US dollar rally took a breather as May PCE inflation data met expectations and declining oil prices eased concerns about the inflation outlook, reducing the perceived need for a hawkish Federal Reserve.
The US dollar bulls stepped back on Wednesday as key inflation data offered no surprises. The May Personal Consumption Expenditures (PCE) price index came in line with market forecasts, removing a potential catalyst for further USD strength.
At the same time, falling oil prices contributed to a lessening of overall inflation worries. Lower energy costs reduce upward pressure on headline inflation, which in turn tempers expectations for aggressive tightening by the Federal Reserve. This combination of data-driven calm and cheaper oil gave traders reason to pause the recent dollar buying binge.
While the greenback remains supported by wide interest rate differentials, the immediate direction may hinge on upcoming economic releases and any shifts in Fed rhetoric.
Source: FXStreet Forex News