Get started

Pceinflation

British pound jumps, US PCE inflation meets expectationsThe British pound has posted sharp gains on Wednesday. In the North American session, GBP/USD is trading at .1.2669, up 0.81% on the day. There are no UK releases today, but in the US it’s a busy data calendar. US GDP (second estimate) showed a gain of 2.8%, unchanged from the initial estimate. The economy is expected to show growth of 2.6% in the third quarter, below second-quarter growth of 3% but still a respectable clip. The US economy has remained surprisingly resilient despite high interest rates, as the Federal Reserve tightened policy in order to contain inflation. The economy showed some cracks due to high rates but the economy has avoided a recession as the economy has been growing and the labor market has cooled but not collapsed. Consumer spending and confidence remain solid and this has helped propel economic growth. Consumer spending rose to 3.5% in the second quarter and consumer confidence increased in October. The US personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation indicator, came in as expected. The PCE price index was unchanged in October at 0.2% m/m, in line with expectations. Annually, the PCE price index rose 2.3%, matching the market estimate but above the September gain of 2.1%. The core rate, which excludes food and energy, gained 0.3% m/m, the same as September and in line with the market estimate. Annually, the gain of 2.8% in October was up from the 2.7% gain in September and matched expectations. The markets have raised the odds of a 25-basis point cut at the Dec. 18 meeting, even though both the headline and core PCE inflation readings rose in October. The probability of a 25-bp cut currently stands at 70% up from 59% a day ago, according to CME’s FedWatch tool. GBP/USD has pushed above resistance at 1.2620 and is testing resistance at 1.2673. Next, there is resistance at 1.2729 1.2564 and 1.2511 are providing support
by OANDA
USD/JPY looking for directionThe Japanese yen continues to show volatility but has closed right where it started over the past few sessions. USD/JPY is trading at 153.65 in the European session, up 0.04% on the day. The yen is coming off an excellent week, surging 2.3% against the US dollar. We’re unlikely to see much movement from the yen today, as there are no US releases on the calendar and only one minor release out of Japan. The Federal Reserve meets later this week but the buzz in the market is around the September meeting. The Fed will meet on Wednesday and there have been a few voices calling for a rate cut, but it’s a virtual certainty that the policy makers will maintain the benchmark of between 5.25% and 5.50%. The markets have priced in a rate hike in September for weeks but things have become interesting with the latest inflation release this past Friday. The PCE Price index ticked lower to 2.5% y/y in June, down from 2.6% in May and in line with expectations. Core PCE remained at 2.6%, just above the market estimate of 2.5%. Monthly, the news was very positive - the PCE Price index rose 0.1% and the core rate climbed 0.2%. As well, personal spending and income both eased in July. The data shows that inflation is on a downtrend and that the spike in the first quarter was an aberration. As well, consumer spending is slowing. The markets have responded by raising expectations for a 50-basis point cut in September to 11.9%, compared to 3.8% one week ago, according to the CME’S FedWatch. A quarter-point cut is very likely, with a probability of 87.7%. The Fed could use this week’s meeting to set the stage for a cut at the September meeting, which means the markets will be closely monitoring the rate statement and Jerome Powell’s rate conference. USD/JPY has pushed past resistance at 154.03 and put pressure 154.36 before retreating 153.58 and 153.25 are the next support levels
by OANDA