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By: Editorial Team, StoneX Media
Core PCE inflation, the Federal Reserve's preferred price gauge, has moved back to the center of the outlook for the U.S. dollar as a fresh climb in oil prices reshapes the inflation picture. Renewed attacks on cargo shipping and rising Middle East tension have lifted energy costs, feeding straight into the data the Federal Reserve watches most. That collision of a looming rate decision and a re-accelerating inflation input now hangs over the Canadian dollar and the wider currency market. The chart levels still matter, but the read on inflation is what tips the balance.
Michael Boutros is a Senior Market Analyst at FOREX.com with more than two decades trading FX, commodities, and equity indices. His work centers on reading price structure across multiple time frames alongside the macro catalysts, such as Federal Reserve policy and inflation data, that move the U.S. dollar and pairs like USD/CAD.
Rising oil prices have moved the inflation outlook back to the front of the queue for the Federal Reserve, just as fresh supply worries build. Renewed attacks on cargo shipping and escalating Middle East tension are lifting energy costs, and as Boutros puts it, "the situation in the Middle East is just getting a little bit more tense, putting pressure on all prices". That matters because energy feeds directly into the price data the central bank tracks, keeping the inflation question open rather than settled. For the U.S. dollar, a hotter inflation input complicates any path toward easier policy and raises the stakes around the next reading. In his view, "the inflation picture is going to remain paramount" as the decision approaches.
The Federal Reserve's coming rate decision, paired with the core PCE inflation reading, is shaping up as the pivot for the U.S. dollar and pairs like USD/CAD. Boutros frames it as a read on both policy and prices, offering "a picture of where the inflation outlook is looking, especially with this recent surge in oil prices" The core PCE print will show whether pressures are cooling or firming, and with oil climbing, the risk leans toward stickier inflation. That keeps the U.S. dollar sensitive to any surprise, since the data will shape both the policy signal and how the market reads it..
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--- Written by Gus Farrow, Senior Manager, StoneX TV
--- Expert: Michael Boutros, Senior Market Analyst, FOREX.com
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