US core PCE data was in line with market forecasts of a 0.4% MoM gain. With a firmer number largely discounted by markets, the on-consensus outcome was treated more like a dovish surprise. The 3m annualized reading did edge up modestly (2.2%, from 2.1%) but holding close to 2% will likely reassure policymakers that underlying pressures are abating slowly. A few more months of data are needed to persuade the Fed that prices are moving sustainably towards 2%. 

The index remains relatively ‘rich’ versus spread-based fair value, according to my estimate at least. That still rather suggests to me that the USD may find it hard to advance significantly, without more support from firmer data and/or higher yields at this point.