During today's Asian trading, the US dollar rose moderately against major currencies after falling by almost 0.9% yesterday and reaching its lowest level since November 13 amid sluggish pre-holiday trade and a series of data that highlighted the resilience of the US economy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, сanadian dollar, pound sterling and swedish krona) rose by 0.23% to 106.33. Yesterday, the index fell by 0.87%, with the focus being on the personal consumption expenditure price index, or PCE. The Fed favored inflation gauge rose 0.2% in October and 2.3% on an annualized basis, in line with expectations. Excluding food and energy, the core measure increased 0.3% m/m and 2.8% compared with a year ago, also matching consensus forecasts. Overall, this data shouldn't change views of the likely path for inflation, however bumpy, but a lot of observers, probably including some at the Fed, are looking for reasons to get more hawkish on the outlook given the potential for inflationary policy change like new tariffs. According to the CME FedWatch Tool, markets see a 66.5% probability of a 0.25% rate cut in December (compared to 55.9% a week ago).
The yen fell 0.5% against the US dollar after it jumped 1.3% yesterday and reached its highest level since October 21 amid an increased likelihood of a rate hike by the Central Bank of Japan at the December meeting (now markets see about a 55% chance of such an outcome).
The euro fell 0.3% against the US dollar, partially offsetting yesterday's growth (+0.75%). The next catalyst for the euro will be German inflation data, which will be published at 13:00 GMT, while eyes are also on France's fragile coalition government, which is struggling to pass a budget.