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On Friday, the dollar index hovered around 104.3 following the release of US PCE inflation data. The figures, which aligned with expectations, indicated softening price pressures and strengthened the case for the Federal Reserve to lower borrowing costs this year. Core PCE prices showed the smallest monthly increase in six months, rising just 0.2%. The annual rate eased to 2.6%, the lowest since early 2021.
The inflation report prompted an increase in the probability of rate cuts. The likelihood of a rate cut by September rose to 66% from 64%, while the odds for a cut by November increased to 78% from 76%. The probability of a rate cut by December also saw a slight increase, rising to 95% from 94%.
Earlier in the session, the greenback received support from the US presidential debate, where Donald Trump was perceived as the winner. The perception boosted the dollar due to expectations that Trump’s policies might lead to increased inflationary pressures.
(Dollar Index Six-month Chart)
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