US August PCE core inflation +0.6% m/m vs +0.5% expected

• PCE core MoM +0.6% vs +0.5% expected
• Prior MoM +0.1%
• Core PCE +4.9% y/y vs +4.7% expected
• Prior was 4.6% y/y
• Headline PCE +6.2% y/y vs +6.3% prior (revised to +6.4%)
• Deflator MoM +0.3% vs -0.1% prior

Consumer spending and income for August:

• Personal income +0.3% vs +0.3% expected. Prior month +0.2%
• Personal spending +0.4% vs +0.2% prior
• Real personal spending +0.1% vs +0.2% expected. Prior month +0.1%

Another hot inflation
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term report is not going to be taken well. That said, the hot August CPI report is what kicked off the latest round of risk aversion
Risk Aversion

Risk aversion is a term used by investors in financial markets, describing the behavior by traders to avoid exposure to uncertainty or risk. The term contrasts with risk appetite, which reflects a trader’s desire to increase their exposure to uncertainty or risk. Risk aversion is a common trait of investors, who seek to hesitate towards investments with an unknown payoff or outcome. These traders will opt for safer forms of investments that are either less volatile, have a more predictable outcome, and/or a lower expected payoff. For example, a risk averse investor may opt for a certificate of deposit or bank account with a fixed but low interest rate, rather than investing in the stock or forex market. Volatility is another factor impacting investors decisions. When there are greater signs of volatility or uncertainty in markets, many investors move towards safe haven assets such as gold. This is due to their stability as assets even in the face of high market volatility and uncertainty. Risk Aversion Explained Risk aversion can have widespread effects on markets. A risk averse or risk-off investor will also look to sell assets that are deemed less predictable.  This can include assets in emerging markets, volatile stocks, or specific currency pairs such as the NZD/USD and AUD/USD, among others.  Currencies that have relatively higher interest rates are regarded as higher-yielding currencies. In the forex market, traders will actively unload their positions in higher-yielding assets and move their capital in favor of safe-haven currencies. Safe haven currencies that are most popular in times of uncertainty are the US dollar, Japanese yen, and the Swiss franc. These currencies are all considered safer due to the size of their large capital markets and liquidity.

Risk aversion is a term used by investors in financial markets, describing the behavior by traders to avoid exposure to uncertainty or risk. The term contrasts with risk appetite, which reflects a trader’s desire to increase their exposure to uncertainty or risk. Risk aversion is a common trait of investors, who seek to hesitate towards investments with an unknown payoff or outcome. These traders will opt for safer forms of investments that are either less volatile, have a more predictable outcome, and/or a lower expected payoff. For example, a risk averse investor may opt for a certificate of deposit or bank account with a fixed but low interest rate, rather than investing in the stock or forex market. Volatility is another factor impacting investors decisions. When there are greater signs of volatility or uncertainty in markets, many investors move towards safe haven assets such as gold. This is due to their stability as assets even in the face of high market volatility and uncertainty. Risk Aversion Explained Risk aversion can have widespread effects on markets. A risk averse or risk-off investor will also look to sell assets that are deemed less predictable.  This can include assets in emerging markets, volatile stocks, or specific currency pairs such as the NZD/USD and AUD/USD, among others.  Currencies that have relatively higher interest rates are regarded as higher-yielding currencies. In the forex market, traders will actively unload their positions in higher-yielding assets and move their capital in favor of safe-haven currencies. Safe haven currencies that are most popular in times of uncertainty are the US dollar, Japanese yen, and the Swiss franc. These currencies are all considered safer due to the size of their large capital markets and liquidity.
Read this Term so high prices in August isn’t exactly a shock.