United States Dollar Index trades subduedly around 101.50 ahead of US PCE Inflation data

The US Dollar (USD) reflects a subdued performance ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower around 101.52. However, the DXY is close to its over-a-year high at 101.80 posted on Wednesday.

Investors will pay close attention to the US PCE inflation data to get fresh cues regarding the current status of inflation. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% Year-on-Year (YoY) from 3.3% in April.

The US inflation data will likely influence market expectations for the Fed’s monetary policy outlook, which already shows that the next interest rate move by the central bank will be on the upside due to elevated energy prices-driven high inflation.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.