Today, the key event will be the release of PCE inflation data. In light of recent geopolitical tensions and the ceasefire between Iran and Israel, the market has been less sensitive to macroeconomic data than before, but this remains an important event to watch, as any data that falls short of expectations could lead to some volatility. In recent days, optimism about a rate cut in September has surged, given the drop in oil prices and news of trade agreements. This has led to a weakening of the dollar.
After all, Powell has stated that a trade agreement could make it easier for the Federal Reserve to begin easing policy. However, Powell also mentioned that only if summer's inflation data exceeds expectations could there be a possibility of easing in September. Earlier this week, after Powell's speech, we are now facing the first inflation data release. Keep in mind that inflation data will also affect the dollar, which is a key catalyst for speculative assets. The PCE inflation is expected to be 2.3% year-on-year, up from 2.1% last month. The core PCE is expected to be 2.6% (2.5% in May).
Any data above this value will be quite bullish for the dollar, while any data below this value will be favorable for speculative assets. This is the first time since last November that PCE is expected to rise compared to the previous month. If a trade agreement is not reached, it could rise even more in the coming months, particularly since the 90-day tariff suspension implemented by Trump will end in July, and new tariffs will come into effect. Rising inflation will reduce the likelihood of the Federal Reserve taking a more aggressive easing cycle, which could be positive for the dollar.