TLDR
- The US Dollar Index held steady around 99.13, near an eight-day high, after US PCE inflation came in above forecasts
- PCE rose 3.7% year-on-year in July, slightly above the 3.6% estimate, keeping Fed rate hike bets alive
- Markets are pricing roughly a 60% chance of a Fed rate hike next month, with all eyes on Jackson Hole
- The South Korean won strengthened after the Bank of Korea raised its benchmark rate by 25 basis points to 3.00%
- Bitcoin rose 0.55% to $78,874 and Ether gained 1.07% to $2,498 during the session
The US dollar held near an eight-day high on Thursday after inflation data came in stronger than expected, keeping pressure on markets ahead of the Jackson Hole central bankers’ symposium.
The US Dollar Index was trading at around 99.13, its highest level since August 19. It rose 0.3% the previous session following the release of the Personal Consumption Expenditures data.
US Inflation Comes In Above Forecast
The PCE price index rose 3.7% year-on-year in July, matching June’s reading but coming in above the 3.6% forecast. Month-on-month, prices rose 0.2%, also stronger than expected.
The data kept alive bets that the Federal Reserve could raise rates again. Markets were pricing around a 60% chance of a hike at next month’s meeting, according to the CME FedWatch tool.
Fed Chair Kevin Warsh is due to speak at Jackson Hole. Investors are watching closely for any signals on the pace and scale of future rate moves.
The Japanese yen held steady at around 159.32 per dollar. Bank of Japan Deputy Governor Ryozo Himino said timely rate hikes could help avoid an inflation spike but stopped short of signalling a move in September.
Money markets were pricing an 87% chance of a BOJ rate hike next month. Analysts noted that wording in Himino’s speech similar to that used before the January 2025 hike could be taken as a strong signal.
Bank of Korea Raises Rates for Second Straight Meeting
The South Korean won strengthened after the Bank of Korea raised its benchmark rate by 25 basis points to 3.00%, its second consecutive hike. The USD/KRW pair fell 0.3% following the decision.
The BOK raised its 2026 growth forecast to 3.3% from 2.6% and signalled further tightening was possible but likely to be gradual. Updated projections pointed to a year-end rate of 3.25%.
The Australian dollar rose 0.2% to $0.718 after domestic inflation data revived expectations of a Reserve Bank of Australia rate hike later this year.
The Canadian dollar held steady at C$1.388 per dollar. US President Donald Trump said it was “time to teach Canada you can’t do this anymore” after trade talks between the two countries broke down.
The euro traded at $1.1655 and the British pound was steady at $1.3592.
In crypto markets, Bitcoin rose 0.55% to $78,874 and Ether gained 1.07% to $2,498 during the session.
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