US dollar dips as inflation data runs cooler than expected

November US PCE inflation data ran cooler than the Fed expected. The month-over-month reading on core inflation was +0.1149% while headline was +0.1280%. Those are both at annual paces slower than 1.5%, which is well below the Fed target.

The numbers throughout the report were lower than economists expected and consumer spending numbers were also a touch light.

The market is now pricing in 44.9 bps in easing in 2025, which is up 10 bps from the post-Fed lows as the market re-adjusts to data and reacts to Republican discord in Congress. I’d say the latter is the biggest driver as the idea of a ‘red sweep’ and a repeat of 2016 comes under question.

Still, the moves after the data have been small and the euro is still far below pre-FOMC levels.

This article was written by Adam Button at www.forexlive.com.