US FX WRAP: Dollar bid on hot-leaning PCE

USD was bid on a hot-leaning PCE report. Core printed in line with expectations of 0.2% M/M and 3.3% Y/Y; meanwhile, the headline was slightly hot at 0.2% M/M (exp. 0.1%) and 3.7% Y/Y (exp. 3.6%). G10 peers were largely weaker on the day, led by NZD, CHF and GBP. Oil prices were choppy, managing to recoup earlier losses initially driven by optimistic reporting on an imminent US-Iran deal which likely helped support the buck. Keeping oil prices and inflationary concerns heightened was a Bloomberg report that Russian President Putin is looking to escalate the war with Ukraine in response to enduring attacks on energy infrastructure, a situation that will likely lead to a further deterioration in the refined products market.

Other US data included US GDP rising 1.5% in Q2 (unrevised from the advance figure), driven by increases in consumer spending, exports, and investment; Durable Goods beat in July, supporting the theme of solid investment. DXY hit highs of 99.23, still shy of the 99.63 highs seen last week before the US Treasury Buyback announcement.

AUD was the clear G10 outperformer vs USD following inflation data. CPI came in above expectations, remaining above the RBA’s 3% upper inflation target, with the RBA’s preferred measure, trimmed mean, unchanged at 3.6% Y/Y above expectations of 3.5%. AUD/USD hit highs of 0.7189 before trimming to around 0.7172.