Jolene, PCE is Beyond Compare

August 26, 2026

Elias Haddad

US July PCE risk cooling Fed rate hike bets, keeping USD in check.

Hot Australia July CPI fuels RBA rate hike expectations. AUD outperforms, Aussie bonds underperform.

Bank of Thailand holds rates as widely expected. THB steady.

USD is firm, consolidating just above last week’s US Treasury buyback announcement lows. US equity futures are treading water ahead of Nvidia Corp.’s results today. Crude oil prices extended this week’s drop as Iran and Oman aim to negotiate a permanent route within 30 to 60 days to resume shipping through the Strait of Hormuz.

We continue to anticipate the DXY index to trade within a 96.00-100.00 range in the next few months. The tailwind to USD from the widening US growth edge relative to other major economies is offset by the risk of a dovish Fed repricing and worsening US fiscal credibility.

Today’s July PCE print (1:30pm London, 8:30am New York) should echo the soft July CPI and retail sales data, giving the Fed room to stay on hold. Headline PCE is seen rising 0.1% m/m vs. -0.1% in June to be 3.6% y/y vs 3.7% in June. Core PCE is expected to rise 0.2% m/m vs. 0.1% in June and remain at 3.3% y/y for a second straight month. Real personal spending is expected at 0.0% m/m vs. 0.4% in June.

Also watch the less noisy Dallas Fed trimmed mean PCE and the Cleveland Fed median PCE measures, due around the New York close, for a cleaner read on underlying inflation. Both moved closer to the Fed’s 2% target in June.

AUSTRALIA

AUD is outperforming. Australia July CPI inflation ran hot, lifting rate hike bets. Headline CPI rose 1.0% m/m (consensus: 0.9%) vs. -0.1% in June driven in part by automotive fuel and clothing. On an annual basis, headline CPI inflation eased less than expected to 3.5% (consensus: 3.3%) vs. 3.8% in June while the trimmed mean CPI remained at 3.6% (consensus: 3.5%) for a second straight month and tracking above the RBA’s end-December 3.3% forecast.

RBA cash rate futures now almost fully price a 25bps hike to 4.60% by year-end, up from 60% before the July CPI data. We still think the risk is skewed towards a more extended pause in the RBA tightening cycle because policy is already somewhat restrictive and the labor market is softening. Regardless, Australia’s attractive carry alongside the country’s strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds.

THAILAND

As was widely expected, Bank of Thailand (BOT) voted unanimously to keep the policy rate at 1.00% for a third straight meeting. BOT reiterated that “the current policy rate is appropriate to support economic recovery” suggesting an extended pause after delivering 150bps of easing since late 2024. Markets price in one 25bps hike in the next 12 months but negative real rates should keep THB lagging its Asian peers.

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