Dollar Slightly Lower as T-note Yields Fall After Dovish US Deflator

The dollar index (DXY00) today is trading slightly lower by -0.06%.  The dollar is being undercut by today's -4.7 bp decline in the 10-year T-note yield to 4.194%, which followed the dovish US PCE deflator report, the Fed's preferred inflation measure.

Today's PCE deflator report was close to expectations and supported the case for a FOMC rate cut in September.  On a month-on-month basis, the June PCE deflator report of +0.1% m/m (headline) and +0.2% (core) was exactly in line with market expectations.  On a year-on-year basis, the June PCE deflator of +2.5% y/y was in line with market expectations, fell from +2.6% in May, and matched the 3-1/4 year low of +2.5% posted earlier this year.  The June core PCE deflator of +2.6% y/y was slightly stronger than expectations of +2.5% and was unchanged from May's 3-1/4 year low of +2.6%.