Inflation and Sentiment Data Pressure Dollar

The dollar weakened Friday after August PCE inflation matched expectations, reducing fears of tariff-driven price shocks. Headline and core PCE rose in line with forecasts, while consumer spending ticked up slightly. However, University of Michigan surveys showed weaker sentiment and sticky inflation expectations. Together, the data supported the case for a dovish Fed stance, pulling the dollar index below its 100-DMA after two days of gains.

Fed Officials Tilt Dovish

Fed commentary reinforced the shift. Richmond’s Thomas Barkin said unemployment and inflation risks appear balanced, with consumers resilient unless job losses rise sharply. Vice Chair Michelle Bowman struck a firmer dovish tone, calling for decisive cuts to preempt labor weakness. More Fed speeches are scheduled Monday, which could refine market expectations further.

Global Policy and Geopolitical Backdrop

China’s PBoC pledged to intensify coordination between fiscal and monetary policy, citing external challenges. Meanwhile, President Trump said progress was being made toward ending the Gaza conflict and securing hostage releases, while Israel’s Netanyahu criticized Western backing for Palestinian statehood. These headlines added to broader geopolitical crosscurrents weighing on the dollar.

FX Market Moves

• EUR/USD reclaimed its 55-DMA, testing 1.17, with RSI momentum supporting bulls.
• GBP/USD rose 0.50%, buoyed by dovish BoE commentary and weaker EUR/GBP flows.
• USD/JPY slipped toward 149.50 as yields fell, though option positioning above 150 kept volatility risks elevated.
• AUD/USD climbed above its 55-DMA, supported by firm gold and silver prices.

Commodities and Risk Assets

Gold hit another record (+0.74%), silver stayed firm, and copper gained 0.21% on softer dollar flows. Oil rose nearly 1% after Ukrainian strikes on Russian energy assets curbed supply. Treasuries steepened modestly, with the 2s–10s spread widening to +53.8 bps, while equities rallied (S&P 500 +0.60%) on broad sector strength.

Summary:
A steady PCE print, dovish Fed rhetoric, and geopolitical uncertainty left the dollar on the back foot. With risk assets buoyant and havens like gold in demand, traders head into next week watching Fed communication and global developments closely.