A consensus increase in the MoM core PCE inflation rate today (0.2%) is likely to mean the 6mth annualised gain will fall to the Fed’s 2% target level and will be another powerful indication that the inflation problem and the view that underlying inflation pressures were ‘sticky’ is simply no longer the case.

A benign print today that confirms for example that the 6mth annualised core PCE rate has hit the 2.0% target will certainly reinforce the prospect of the Fed cutting rates as early as March. However, that is now close to fully priced with 23/24 bps priced and hence it is hard to envisage a big rates move today.

While the Dollar could still extend further weaker due to momentum and positioning in a low-volume market, from a fundamental perspective further Dollar selling from here could prove more difficult.