Dollar firms on hawkish Fed bets as gold stalls at $4,700

Headline US PCE inflation came in at 3.7% against the 3.6% expected, reviving hawkish Fed bets, firming the dollar and sending gold back down from the $4,700 ceiling that had already stalled it on Tuesday.

Major currency movements

• The US dollar found support after a mixed inflation print. Headline PCE held at 3.7% year-on-year, above the 3.6% consensus, while core PCE was steady at 3.3%, in line — and the second estimate of Q2 GDP was unrevised at 1.5%. A hot headline with an in-line core was enough to keep traders focused on the Federal Reserve's rate outlook, with the Dollar Index climbing toward 99.20. InvestingLive also reported the USD as mostly higher, driven by higher yields, which saw the Mexican peso dip and slowed appreciation for the Chinese yuan, according to ING, and the South Korean won, per OCBC.
• Gold retreated from a three-month high to near $4,610, down 1.37% on the day. The $4,700 ceiling we flagged yesterday held: buyers stalled at $4,697 on Tuesday, the metal's highest since 14 May, and the hot headline PCE print sent it back down rather than through.
• Crude made a round trip. WTI slid below $80 to the $79.50 area, a 9% drop from last week's highs above $87, as hopes of a Hormuz reopening and US-Iran de-escalation eased supply fears, with Brent breaking under $90. It then reversed through the US session and settled little changed at $82.23, up 1.78% — a second day anchored around $82.
• The Australian dollar extended its rally to a third straight session, trading near 0.7176, propelled by RBA hike bets that countered the impact of US data. The July inflation reading behind those bets landed hot: CPI came in at 3.5% year-on-year against the 3.3% expected, with trimmed mean stuck at 3.6%, and both TD Securities and MUFG now flag the risk of an earlier hike than markets price. The New Zealand dollar, meanwhile, steadied as the firmer US dollar capped its gains.
• On an intraday basis, our strength gauge ranked the British Pound as the strongest major, despite headlines noting the currency "stops dead where American data left it". Over the full session sterling fell roughly 0.4% to just under 1.3600, a five-day low that ends its run near the 1.3675 six-month high it had been holding all week.
• The Canadian dollar was the weakest major on our intraday strength gauge — a complete reversal from yesterday, when it was the strongest, and the second session running in which a major crosses the whole table. Its usual link to oil broke down: the loonie fell even as crude recovered, with trade tensions and US inflation taking over. TD Securities estimates the new Section 338 US tariffs and Ottawa's retaliation, effective 8 September, will trim about 0.3 percentage points from Canadian growth by 2027; Scotiabank put USD/CAD near its fair value estimate of 1.3862.
• The Japanese yen slipped ahead of Tokyo CPI data, with USD/JPY around 159.40 after a third straight day higher. Scotiabank noted it is range-bound against the US dollar as markets gradually price a 25 basis point Bank of Japan hike for 18 September, with FXStreet highlighting intervention risk capping bulls at 160.00.

Market insights & upcoming events

• Bloomberg reported that the Islamic Revolutionary Guard Corps says it has reached a revenue-sharing agreement with Oman over the Strait of Hormuz. The claim is Tehran's own, and the same report notes the standoff with Washington over control of the waterway continues — while yesterday's reported US-Iran ceasefire, which came from a Russian state agency citing anonymous sources, has still not been confirmed anywhere else.
• Our own gauges rebounded hard. MRS jumped from 41 to 57 in one session, and almost all of it is the news component, which recovered from 2 to 18 out of 20 because today's calendar carries no High impact releases after yesterday's three. Volatility did not move at all — the ATR input was 4 out of 30 on both days. CTS stayed high at 79 and FSI edged up to 71 (Greed).
• USD · Unemployment Claims: SCHEDULED · forecast 208K vs previous 206K
• All · Jackson Hole Symposium: SCHEDULED · Kevin Warsh gives his first address as Fed Chair on Friday, and the dollar was already being squared ahead of it
• JPY · Tokyo Core CPI y/y: SCHEDULED · forecast 1.8% vs previous 1.9%