US PCE prices rose 3.7% year-over-year, exceeding forecasts and lifting the Dollar Index above 99.00.
The Dollar Index climbed to near 99.25 after Personal Consumption Expenditures (PCE) prices increased 3.7% year-over-year, above the 3.6% consensus. The move followed the data release at 12:30 GMT, though market expectations for a September rate hike remain subdued.
Rate markets trimmed terminal rate expectations, with a September 16 hike now priced at 40.14%, down from earlier levels. December remains fully priced for at least one increase, but conviction for a second hike by year-end has dropped sharply to 8.13%.
The shift reflects a market now focused on timing rather than magnitude, with the 2027 path also reflecting reduced expectations for further tightening.