US February core PCE inflation ran at 4.6%, which is a tad lower than the economists' consensus of 4.7% and a sign of easing inflation pressures. For more of the past two years, inflation numbers have overshot estimates, catching the Federal Reserve offguard. Now the numbers are fading as improved supply chains and higher interest rates throttle pricing.

The month-over-month increase in headline and core inflation was 0.3%, which is still above target in annualized terms but were both cut in half from the previous month, in a sign that they're moving in the right direction.

The lower inflation numbers will diminish the Fed's urgency to hike, even as banking conditions improve. Fed fund futures imply a 55% chance of a 25 bps hike at the upcoming May 3 meeting but the market expects that to be the top, with the potential for cuts late in the year.

With that, the US dollar fell on the headlines. USD/JPY slumped to 132.90 from 133.25 while the euro rose to 1.0890 from 1.0875.

USDJPY intraday
USDJPY intraday

Gold is also cheering the turn from the Fed. It rose $10 on the headline to a high of $1987. Earlier this month, it rose as high as $2009 on speculation the Fed would have to cut rates to stem the banking crisis but it's mostly held those gains despite the better banking tone. It was at $1820 before the banking troubles.

gold daily