HiFX: Foreign Exchange Specialists

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June 27, 2008

Today’s’ release of May’s Core PCE number will come as a welcome relief for the doves who were concerned that recent inflationary pressures showed no signs of easing.  With an unchanged year on year reading of 2.1%, inflation appears to be moderating in the short term and consequently it will allow the Fed more room for maneuver should they decide that the US economy is not robust enough to withstand a tightening of monetary policy.  On the back of the news market participants continued to temper their expectations on just how aggressive the Fed can be if called upon resulting in the USD falling 1.6% against a basket of currencies.