Hot PCE Data Pushes Dollar Above 99

The US dollar maintained its gains during Thursday's trading (August 27) after stronger-than-expected US economic data reignited expectations that the Federal Reserve might raise interest rates before the end of the year. The Dollar Index traded above the 99 level, extending gains from the previous session.

Hawkish sentiment resurfaced after the July PCE Price Index rose 0.2% month-on-month—surpassing the 0.1% forecast and reversing the 0.1% contraction seen in June. On an annual basis, PCE inflation climbed to 3.7%, also exceeding market estimates of 3.6%.

The data indicates that US price pressures remain robust, reinforcing the argument that the Fed has little room to loosen policy. Expectations regarding a potential rate hike before year-end have regained attention, providing additional support for the dollar and Treasury yields.

Market focus has now shifted to the speech by Fed Chair Kevin Warsh at Jackson Hole on Friday. Investors will be looking for clues regarding the central bank's view on persistently high inflation, although Warsh is not expected to provide explicit signals concerning the September interest rate decision.

Meanwhile, a drop in oil prices—driven by diplomatic progress in the Middle East—has helped alleviate some short-term inflation concerns. Investors are also weighing the impact of the US Treasury's bond buyback program and fiscal risks that had previously weighed on confidence in the greenback.