- Core PCE inflation in June remained steady at 2.8%
- The US dollar index is hovering just below 100.00.
According to a report from the U.S. Bureau of Economic Analysis, annual inflation in the U.S. rose from 2.4% in May (which was revised from 2.3%) to 2.6% in June. This figure surpassed market predictions, which were around 2.5%.
The core PCE price index, which leaves out volatile food and energy costs, also rose 2.8% during the same timeframe, matching the increase seen in May. Analyst forecasts had placed it just above 2.7%. Each index, the PCE Price Index and the Core PCE Price Index, increased by 0.3% month-over-month.
Additional details indicated that personal income and spending both ticked up by 0.3% in June.
Market Reaction to PCE Inflation Data
After the release of this data, the US dollar index made a slight recovery from its session low and was trading around 99.90.
This Week’s US Dollar Price
The following table highlights how the US dollar (USD) has changed against various currencies this week, with the dollar proving strongest against the euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 2.83% | 1.58% | 1.59% | 1.00% | 2.10% | 1.92% | 1.95% | |
| EUR | -2.83% | -1.24% | -1.15% | -1.79% | -0.70% | -0.89% | -0.86% | |
| GBP | -1.58% | 1.24% | -0.10% | -0.55% | 0.54% | 0.35% | 0.38% | |
| JPY | -1.59% | 1.15% | 0.10% | -0.60% | 0.45% | 0.29% | 0.48% | |
| CAD | -1.00% | 1.79% | 0.55% | 0.60% | 1.08% | 0.91% | 0.94% | |
| AUD | -2.10% | 0.70% | -0.54% | -0.45% | -1.08% | -0.19% | -0.16% | |
| NZD | -1.92% | 0.89% | -0.35% | -0.29% | -0.91% | 0.19% | 0.03% | |
| CHF | -1.95% | 0.86% | -0.38% | -0.48% | -0.94% | 0.16% | -0.03% |
The table illustrates the changes among major currencies based on the US dollar as the base currency. For instance, the value shown for the USD against the JPY indicates the fluctuation rate between these two.
Inflation FAQ
Inflation refers to the increase in prices for a standard basket of goods and services, typically expressed in both monthly and yearly percentages. Headline inflation factors in everything, while core inflation omits volatile areas like food and fuel. Economists generally focus on core inflation, which ideally sits around 2% to maintain balance.
The Consumer Price Index (CPI) tracks price shifts in goods and services, showing changes over time. Core CPI, which excludes volatile inputs, is a key figure that central banks keep their eyes on. If it surpasses 2%, usually interest rates go up, and they dip when it falls below 2%. Higher interest rates typically strengthen a currency, while lower rates can have the opposite effect.
This can seem a bit confusing, but high inflation can actually elevate a currency’s value. The reason? Central banks often respond to inflation by raising interest rates, drawing in global capital from investors searching for solid opportunities.
Interestingly, gold has traditionally been a safe investment during times of high inflation. However, when inflation climbs, banks may raise interest rates, which tends to diminish gold’s appeal as an asset. Conversely, lower inflation often works in favor of gold since reduced interest rates can make it a more attractive investment option.
