Inflation index will move USD

Inflation index will move USD

What will happen?

Core Personal Consumption Expenditures (PCE) Index is similar to Core Consumer Price Index (CPI), and the US Bureau of Economic Analysis publishes it monthly. The only difference between them is that PCE measures solely goods and services targeted towards and consumed by individuals. Prices are weighted according to total expenditure per item, which gives important insights into consumer spending behavior. According to many analysts, the Federal Reserve prefers this indicator to estimate inflation.

How will it affect the dollar?

Because of the 7.5% consumer inflation in the US, the USD is fluctuating, and it is affected by many factors. So, the market is waiting for the beginning of rough changes and hawkish steps by the Federal Reserve. Will the actual release amaze traders this time?

On January 28, 2022, the last release got completely in line with the expectation of 0.5%, the same as the previous releases; however, the USD hit the low and kept fluctuating this day, even though it used to trade at high levels.

US PCE.png

How to trade on the Core PCE release?

Due to the importance of the CPE index, the impact on gold and USD pairs can occur. Gold is considered a hedge against inflation, but high numbers increase the chance for rate hikes so that the metal may fall against the USD.

  • If actual numbers beat expectations – the USD will go up, and gold (XAU/USD) will fall.
  • On the contrary, gold will rise.

Check the economic calendar

Instruments to trade: XAU/USD, EUR/USD, USD/CAD, USD/CHF.

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