DXY: Dollar Index Adds 0.4% to Top 104.00 After PCE Inflation Meets Consensus at 2.8%

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Fed’s preferred inflation measure stayed in line with expectations and then the dollar decided to defy gravity.

  • The dollar index DXY took off on Thursday, paring intraday losses, after the latest US report boosted optimism for fading price pressures. The PCE report—personal consumption expenditures—increased by 2.8% in January from a year ago, in line with analysts’ consensus.
  • The PCE figure is the Federal Reserve’s favorite inflation gauge as it captures a wider view of the economy, compared with the CPI, or consumer price index. In that light, another cooling PCE number solidified inflation’s downward trajectory despite the latest rise in the CPI.
  • With that, the dollar jumped 0.4%, defying the general notion that falling inflation should dent the local currency’s valuation. The buck shifted gears from 103.60 and crossed the 104.00 threshold, hitting a Friday session high of 104.15. Other currencies in the FX space retreated, paving the way for fresh dollar gains across the board.