Dollar Index DXY Falls on Reduced Fed Rate Hike Chances Amid Weaker Inflation Readings

The US dollar index DXY slipped by -0.17% on Wednesday due to reduced chances of a Federal Reserve rate hike next month, following weaker-than-expected inflation readings.

The August core PCE price index rose +0.2% month-over-month and +3.0% year-over-year, which is lower than the expected +0.3% and +3.3% respectively. The Q2 GDP was revised upward to +2.2% annualized from an initial estimate of +1.5%, while the Q2 core PCE price index was revised downward to +3.3% from +3.6% previously.

The drop in Fed rate hike chances to 35% has weighed on the dollar, but it's limited by signs of strength in the US economy. The August personal spending rose +0.9% month-over-month, the largest increase in five months. The September ADP employment change rose by +90,000, exceeding expectations.