Dollar Edges Higher Ahead of Core PCE Data

Key Takeaways:

• Dollar edges higher on bargain buying ahead of holiday season.

• Softer U.S. inflation and housing data keep the long-term trend bearish.

• Market eyes Core PCE Price Index release for guidance on Fed policy.

Market Summary:

The dollar index, tracking the greenback against a basket of six major currencies, rebounded modestly on Friday as investors engaged in bargain buying ahead of the holiday period. Market participants remain cautious amid lingering uncertainties over the U.S. economic recovery and the accuracy of recently delayed data, released only after the longest government shutdown in history.

Despite the short-term rebound, the longer-term outlook for the dollar remains under pressure. Cooling inflation and mixed labor market signals have strengthened expectations for further Federal Reserve rate cuts. Recent housing data have also disappointed, with the National Association of Realtors reporting U.S. existing home sales at 4.13 million, below market expectations of 4.15 million, further dampening confidence in the dollar.

Looking ahead, market focus turns to the upcoming U.S. Core PCE Price Index release, scheduled for later this week. The report is expected to provide a clearer indication of inflationary pressures and could influence both near-term trading flows and Fed policy expectations. With liquidity thinner than usual during the holiday season, dollar movements are likely to remain muted until these critical data points are published.