Oil Price Pullback Could Temper Inflation Expectations

Oil Price Pullback Eases Inflation Fears

Brent crude futures have fallen below $100 a barrel, driven by hopes of a U.S.-Iran peace deal. Analysts suggest that if prices slide toward $90, short-term inflation expectations could moderate, potentially providing a boost to risk assets and reducing bets on rate hikes in 2027.

Key PCE Data in Focus

The release of U.S. core PCE data this week will test inflation expectations. The yearly figure is expected to tick higher, with headline PCE inflation forecast at 3.8%—nearly double the Federal Reserve's target.

According to Chris Weston of Pepperstone, the drop in oil prices could limit the dollar's reaction to incoming data. He notes that dollar positioning is stretched, and easing energy-driven inflation expectations might unwind some of the long USD positions. Brent was last at $98.29, while the DXY dollar index dipped 0.2% to 98.98.