- U.S. Core Personal Consumption Expenditure (PCE) to Uptick to Annualized 1.6% in February. Personal Income to Increase 0.4% During the Same Period.
- EUR/USD[1] Fails to Retain Bullish Sequence. March Range in Focus Following Failed Attempt to Test 2018-High (1.2556).
Trading the News: U.S. Personal Consumption Expenditure (PCE)
A pickup in the core U.S. Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may fuel the recent decline in EUR/USD as it boosts bets for four rate-hikes in 2018.
Data prints pointing to faster price growth may spark a bullish reaction in the greenback as it encourages the Federal Open Market Committee[2] (FOMC) to implement higher borrowing-costs over the comings months, and the central bank may adopt a more hawking tone at the next meeting on May 2 as ‘inflation on a 12-month basis is expected to move up in coming months and to stabilize around the Committee's 2 percent objective over the medium term.’
However, a below-forecast print may generate near-term headwinds for the greenback as it dampens the scope for an extended hiking-cycle, and Chairman Jerome Powell and Co. may continue to project a neutral Fed Funds rate of 2.75% to 3.00% as ‘market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.’
Impact that the U.S. PCE report had on EUR/USD during the previous release
|
Period |
Data Released |
Estimate |
Actual |
Pips Change (1 Hour post event ) |
Pips Change (End of Day post event) |
|
JAN 2018 |
03/01/2018 13:30:00 GMT |
1.5% |
1.5% |
+3 |
+93 |
January 2018 U.S. Core Personal Consumption Expenditure (PCE)
EUR/USD 5-Minute Chart
The core Personal Consumption Expenditure (PCE) held steady at an annualized 1.5% for the third consecutive month in January, while the gauge for Personal Income increased 0.4% during the same period amid forecasts for a 0.3% print. At the same time, Personal Spending increased 0.2% after expanding 0.4% in December, while a separate report showed Initial Jobless Claims unexpectedly narrowing to 210K in the week ending February 24 from a revised 220K the week prior. Even though the mixed data prints produced a limited reaction in EUR/USD, the pair gained ground throughout the North American trade to end the day at 1.2267.
EUR/USD Daily Chart
Broader outlook for EUR/USD remains constructive as price and the Relative Strength Index (RSI) continue to track the upward trends carried over from late last
