But for markets, the more useful question is not simply whether inflation remains high. It is whether the rate of inflation is accelerating again<\/strong>.<\/p>\n\n\n\n That puts the monthly core PCE number firmly in focus.<\/p>\n\n\n\n A reading around 0.2% month-on-month or softer<\/strong> would fit neatly with the narrative that has developed across markets over the past week:<\/p>\n\n\n\n Oil falling \u2192 inflation risk easing \u2192 Treasury yields contained \u2192 less support for the dollar.<\/strong><\/p>\n\n\n\n It would not mean the Fed has defeated inflation. Instead, it would make it harder for markets to justify aggressively rebuilding expectations for higher rates at a time when energy prices and longer-term yields are already moving in the opposite direction.<\/p>\n\n\n\n The risk to that view is a clear upside surprise.<\/p>\n\n\n\n A 0.3% core reading<\/strong> would reinforce concerns that underlying inflation remains sticky, while 0.4% or higher<\/strong> would be much more disruptive. In that scenario, Treasury yields could reverse higher as markets reconsider the risk of further Fed tightening, potentially giving the dollar a much-needed catalyst for recovery.<\/p>\n\n\n\n Boston Fed President Susan Collins reinforced that sensitivity this week, warning that rates may need to rise unless the inflation data provides convincing evidence of further progress.<\/p>\n\n\n\n The technical picture makes today’s release particularly interesting.<\/p>\n\n\n\n DXY spent much of the year trading within a broad rising channel, but the recent sell-off has now pushed the index decisively beneath the lower boundary of that structure.<\/p>\n\n\n\n That matters.<\/p>\n\n\n\n The dollar is no longer simply pulling back inside an established uptrend. It is now attempting to stabilise below former trend support<\/strong>, with the index sitting around the 99.00 area on the chart.<\/p>\n\n\n\n Unless price can quickly reclaim the broken channel, the next important area sits lower around 97.65\u201398.00<\/strong>.<\/p>\n\n\n\n That shaded zone has previously attracted demand and represents the clearest downside area to watch if today’s inflation data allows the bond rally to continue.<\/p>\n\n\n\n Below the broken channel, the bias remains towards 97.65\u201398.00.<\/strong><\/p>\n\n\n\n A benign core PCE reading around 0.2% or below would strengthen that view, particularly if US yields respond by moving lower again.<\/p>\n\n\n\n The cleaner invalidation would be a combination of hotter PCE + rising Treasury yields + DXY reclaiming the broken channel<\/strong>, rather than simply a temporary intraday dollar bounce.<\/p>\n\n\n\n Today’s release is only the first hurdle.<\/p>\n\n\n\n Markets then face the $44 billion seven-year Treasury auction on Thursday<\/strong>, before attention turns to Federal Reserve Chair Kevin Warsh at Jackson Hole on Friday.<\/p>\n\n\n\n That creates an unusually concentrated sequence of catalysts for the rates market.<\/p>\n\n\n\n PCE tests the inflation story.<\/p>\n\n\n\n The Treasury auction tests demand for US duration.<\/p>\n\n\n\n Warsh then has the opportunity to shape expectations around how the Fed intends to respond.<\/p>\n\n\n\n For now, however, the dollar sits on the weaker side of that equation. Oil is falling, longer-dated yields have come off their highs and DXY has broken its rising technical structure.<\/p>\n\n\n\n If today’s inflation report fails to challenge that combination, the 97.65\u201398.00 support zone may be the next destination for the dollar index.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Falling oil and lower Treasury yields are weighing on the dollar, with today\u2019s core PCE print set to decide whether DXY extends towards key support.<\/p>\n","protected":false},"author":162,"featured_media":32758,"parent":0,"comment_status":"open","ping_status":"closed","template":"","market_insights_categories":[17],"class_list":["post-32745","market_insights","type-market_insights","status-publish","has-post-thumbnail","hentry","market_insights_categories-opening-bell"],"acf":[],"yoast_head":"\nCore PCE MoM<\/th> Macro read<\/th> DXY implication<\/th><\/tr><\/thead> \u22640.2%<\/strong><\/td> Benign; disinflation story survives<\/td> Bearish USD bias<\/td><\/tr> 0.3%<\/strong><\/td> Inflation remains sticky<\/td> Two-way; dollar receives some support<\/td><\/tr> \u22650.4%<\/strong><\/td> Clear upside inflation shock<\/td> Yields and USD could rebound sharply<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n DXY: the channel has broken<\/h2>\n\n\n\n
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<\/figure>\n\n\n\nPrimary view<\/h3>\n\n\n\n
The next test does not end with PCE<\/h2>\n\n\n\n