The dollar index was slightly lower around 103 on Friday, as investors digest slowing PCE inflation. The Fed’s preferred inflation gauge rose 0.3% mom, in line with forecasts and below 0.4% in April. Also, the annual core rate slowed to 4.6% and the headline PCE rate reached the lowest in nearly two years. Early in the week, Chair Powell pledged that interest rates will rise again this year, and data including an upwardly revised GDP growth for Q1 pointed to a robust economy. Most traders still bet the Fed will deliver a 25bps increase in the fed funds rate in July, although the chances fell slightly to 87% from 89% before the PCE release. Also, the odds for another quarter-point hike in September eased to 21% from 25%. The dollar index gained nearly 0.5% on the second quarter.
