The US dollar strengthened against major currencies in trading on the New York foreign exchange market on Wednesday, September 30, with the dollar index rising 0.08% to 101.451 after a surge in oil prices pushed US government bond yields higher. However, the dollar pared its gains after the US Commerce Department reported that the headline PCE index for August rose 3.4% year on year, below analysts' expectations of 3.7%, while the core PCE index rose 3.0%, below expectations of 3.3%. Following the release of the data, the CME Group's FedWatch Tool indicated that investors priced in a 37% probability that the Fed will raise interest rates by 0.25% at its October meeting, down from 51% on Tuesday and 71% last week. The US Commerce Department also released its third estimate for second-quarter GDP, showing growth of 2.2%, higher than the first and second estimates of 1.5%. Investors are watching the US nonfarm payrolls report due on Friday, October 2, with analysts expecting an increase of 98,000 jobs in September after a rise of 162,000 in August, and expecting the September unemployment rate to hold steady at 4.1%.
PCE below expectations cuts odds of a Fed rate hike, pushing Treasury yields higher as the dollar strengthens.
