US headline Personal Consumption Expenditures (PCE) inflation was 2.9% year-on-year in December, according to the US Department of Commerce. Core PCE inflation, which excludes food and energy, was 3.0% year-on-year.<\/p>\n
On a month-on-month basis, both headline PCE and core PCE rose by 0.4%. Both readings were above initial estimates.<\/p>\n
After the release, the US Dollar Index (DXY) stayed firm and traded near 98.00. This level was around a four-week high.<\/p>\n
The Personal Consumption Expenditures data from back in December 2025 showed that inflation was more persistent than we thought. With both the headline and core monthly figures rising 0.4%, it suggested the Federal Reserve would have little reason to consider cutting interest rates soon. The market’s immediate reaction at the time, pushing the Dollar Index towards 98.00, was a clear signal of this thinking.<\/p>\n
That trend has only been reinforced by more recent data released over the past few weeks. The January 2026 jobs report showed the U.S. economy added a surprisingly strong 225,000 jobs, crushing expectations and pointing to continued economic resilience. This was followed by the January CPI report, which clocked in at an annualized 3.1%, confirming that the final steps in getting inflation down to 2% are proving difficult.<\/p>\n
For interest rate traders, this means we should re-evaluate positions expecting imminent rate cuts. The market has already pushed back its timeline, with fed fund futures now implying the first rate cut is more likely in the third quarter of 2026, rather than the second. Betting against near-term rate cuts by selling SOFR futures or buying put options on Treasury note futures could be a prudent strategy.<\/p>\n
In the currency markets, the case for a stronger U.S. dollar in the coming weeks remains solid. As other central banks signal a greater willingness to ease policy, the Fed’s hesitation creates a favorable interest rate differential for the dollar. We can use options to play this, such as buying calls on the U.S. Dollar Index (DXY) to profit from its potential rise above the 100.00 level.<\/p>\n
This situation is reminiscent of the market dynamics we saw in 2023, when stubborn inflation data repeatedly forced traders to delay their rate cut forecasts, fueling dollar strength. Given the sticky core PCE from December and the strong follow-up data in January, we should anticipate a period of higher volatility. Traders might consider buying protection or speculative positions using options on major stock indices, as the market digests the reality of higher-for-longer interest rates.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" December US PCE inflation hit 2.9% annually, core 3.0%; both rose 0.4% monthly, boosting DXY.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42441","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/42441","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=42441"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/42441\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16964"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=42441"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=42441"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=42441"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}