Inflation is the 'number one' factor driving the dollar: Expert

The US Dollar Index (DX-Y.NYB) is moving to the upside as the Federal Reserve's preferred inflation gauge, the Personal Expenditure Consumption (PCE) Index, came in hotter than expected. TD Bank Global Head of FX and EM Strategy Mark McCormick joins Yahoo Finance to give insight into the FX market and inflation's impact on the dollar.

McCormick discusses a new dominating theme in the FX market: "For a while, the market's been really focused on the relative growth developments between the US and the rest of the world, where the rest of the world has actually been narrowing that gap. Last three months, it just completely flipped, and upside surprises in inflation, which have been generally ignored by the market for the most part of the year, has become the most important dominating theme in FX."

"Now what we're seeing is that inflation is taking over, and it's very strong in the US relative to other countries, particularly in the G-10. Not so much in emerging markets, but that is now what's dictating the market outcome, which is everyone's focused on, will the Fed cut? Can the Fed cut?" the FX expert adds.

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Nicholas Jacobino