Home Forex Core PCE inflation takes center stage

Core PCE inflation takes center stage

by SuperiorInvest
  • The dollar extends its advance while awaiting the basic data of the PCE
  • Dollar/yen remains under intervention watch
  • S&P 500 achieves best first quarter in five years
  • Gold hits new record

Will the PCE data point to rigid inflation?
The US dollar continued to outperform most of its major peers on Thursday, as the upward revision of US GDP data for the fourth quarter added more credence to Fed Governor Waller's view that the Fed is not should hurry to lower interest rates.

Today, dollar traders have become more cautious, avoiding large positions ahead of the important PCE inflation numbers due out today. The focus is likely to be on the core PCE rate as it is considered the Fed's favorite inflation metric, with the forecast pointing to an unchanged year-over-year rate of 2.8%.

With the Atlanta Fed's GDPNow model suggesting the U.S. economy continued to do well through the first quarter of 2024, another release pointing to persistent inflation may prompt market participants to further reduce their cut bets. June and, therefore, add more fuel to the dollar's engines. .

Is yen intervention a matter of time?
It is worth noting that most bond and stock markets will be closed today for the Good Friday holiday and therefore, due to tight liquidity conditions, exchange rate volatility may be higher than usual. Another round of dollar buying could push the dollar against the yen above the critical ceiling of 152.00 and perhaps trigger intervention by Japanese authorities.

Even if officials don't hit the intervention button immediately, they could intensify their warnings about unilateral speculative moves in the Japanese currency and perhaps scare yen sellers out of the market. If traders don't blink, they could put the 155.00 area on their radars.

gains as oil recovers
The Canadian dollar was not a victim of the dollar's advance, benefiting from Canadian GDP data, which revealed that the economy saw a stronger-than-expected rebound in January.

The rebound in oil prices may also have helped the commodity-linked currency. Although there was no clear catalyst for the latest oil price rally, recent headlines that the OPEC+ group is unlikely to proceed with production changes until June, as well as supply disruptions due to geopolitical conflicts, keep backed by black gold.

Wall Street weakens and gold hits new all-time high
Wall Street traded weakly on the final trading day of the first quarter, with the Dow Jones and S&P 500 finishing slightly in the green and the Nasdaq losing some ground. That said, yesterday's trading closed out the strongest first quarter for the S&P 500 since 2019.

Today, Wall Street will remain closed, but any PCE-related impact will likely be reflected in Monday's activity. If the data confirms that US inflation is stiffer than previously expected, Wall Street could open Monday's session with a negative gap.

Gold is soaring today, entering uncharted territory again and approaching the $2,245 zone, which is the 161.8% Fibonacci extension of the May-October decline. Although the US Treasury market will be closed today, a stronger dollar thanks to strong PCE data could lead to a pullback from near that area.

However, as central banks continue to increase their purchases in an attempt to diversify their currency reserves and geopolitical uncertainty remains high, the likelihood of another northward move, and perhaps a break above the technical zone At $2,245, it is high.

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