• Core PCE inflation came in a little above expected at 4.9% in December. 
• The DXY has seen some weakness, which analysts said reflected weaker Q4 US wage data released at the same time.   

Inflation in the US, as measured by the Core Personal Consumption Expenditures (PCE) Price Index, rose to 4.9% YoY in December, the US Bureau of Economic Analysis reported on Friday. That was slightly above the consensus forecast for an inflation rate of 4.8% and marked a slight acceleration from November's Core PCE inflation rate of 4.7%. The MoM rate of Core PCE inflation was 0.5% in December, in line with expectations and unchanged from November's inflation rate. Core PCE is the Fed's favoured measure of underlying inflation. 

Market Reaction

Despite the headline YoY rate of Core PCE coming in a little hotter than expected for December, the DXY has seen a slight pullback in recent trade, dipping back into the 97.10s from close to 97.40 prior to the data. Some analysts have said this could be a reflection of weaker than expected US Q4 Employment Cost Index data, which was released at the same time as the Core PCE data at 1330GMT. The Index rose 1.0% QoQ last quarter, below expectations for an inflation rate of 1.2% and below Q3's 1.3% rate.