USD rally pauses as global risk appetite improves
The US Dollar rally has paused due to improved global risk appetite. Core PCE rose 0.3% MoM in May, in line with consensus expectations, but remains above the Fed’s target at 3.4% YoY.
The pause in the USD rally is attributed to sticky US inflation and steady labour data, which keep hawkish Fed risks alive. Reduced forward guidance increases data sensitivity, lifting FX volatility and supporting the Dollar.
US growth outperformance and policy divergence are seen as key medium-term supports for the USD. Jobless claims remain consistent with a stabilizing labour market, pointing to decent June payroll growth.