Analysts Watch Closely as US Dollar Reaches Inflection Point Ahead of Core PCE Data Release


Today marks the last trading day of the month. It is expected that volatility in financial markets will increase, especially during the London and North American sessions. This is why the US dollar might move aggressively, as it is a main driver for the cryptocurrency market this year.

The US dollar weakened since last October; this is evident by the EUR/USD bouncing from 0.95 and rallying to 1.12. Bitcoin and other cryptocurrencies also responded, but as the EUR/USD could not hold above 1.12, they lost their 2023 highs.

Two pieces of economic data might explain the US dollar’s movements this week: Core PCE Price Index m/m and the August NFP report. The former is the Fed’s favorite way of interpreting inflation and will be released later today. The market expects it to be 0.2% MoM, however Jerome Powell believes inflation has peaked.

The second part of the Fed’s mandate deals with job creation. Therefore, the August NFP report is expected to come on the soft side if the JOLTS report and private employment data have already disappointed. This could result in the dollar’s weakness accelerating.

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