Dollar eyes core PCE price index at the start of a busy week – Forex News Preview
April 27, 2018 1:26 pm
The coming week will be a busy one in the US, with an FOMC meeting on Wednesday and an employment report on Friday likely to provide ample volatility for dollar traders. Ahead of these events though, on Monday at 1230 GMT, the US will release other key data, including the core PCE price index as well as personal income and spending figures, all for March. Forecasts point to an encouraging set of prints, which could help the greenback to extend its latest rebound.
Economic data have continued to paint a rosy picture for the US economy recently, leading market participants to price in a slightly more hawkish rate path for the Fed over the remainder of the year. Until a few weeks ago, investors had fully priced in one more quarter-point rate hike by year-end, and also saw an 80% probability for a second one. Now though, two more rate increases have been fully factored in, and markets see a 20% chance for a third one, according to Fed funds futures.
With that in mind, it will be crucial to see how the aforementioned risk events play out in the coming week. Depending on the quality of the data and the Fed’s tone at its policy gathering, we may well see a significant repricing of these expectations. In terms of the data we receive on Monday, attention will likely fall predominantly on the core PCE price index, which is the Fed’s preferred inflation measure. Forecasts point to an acceleration in prices, with the index expected to reach 1.8% in yearly terms from 1.6% in February, something supported by a similar acceleration in the core CPI for the same month.
As for personal spending, it is projected to have picked up speed and to have reached 0.4% in monthly terms, from 0.2% in the prior month, in line with the pick-up seen in retail sales. Finally, personal income is anticipated to have risen by 0.4%, the same pace as previously.
Should these data meet or exceed their respective forecasts – particularly the core PCE print – then the dollar could extend its latest rebound as investors become more confident in the Fed delivering three more hikes this year. Looking at dollar/yen, resistance to advances could come around the psychological 110.00 handle. Further up, sell orders may be found near 110.50, the peak of February 2.
On the downside, and in case of a disappointment in these data, support to declines in dollar/yen may be found initially near 108.50 – the area around this level was congested in early February. Further down, the 107.80 zone may stall declines, marked by the high of April 13.
The coming week will be a busy one in the US, with an FOMC meeting on Wednesday and an employment report on Friday likely to provide ample volatility for dollar traders. Ahead of these events though, on Monday at 1230 GMT, the US will release other key data, including the core PCE price index as well as personal income and spending figures, all for March. Forecasts point to an encouraging set of prints, which could help the greenback to extend its latest rebound.
Economic data have continued to paint a rosy picture for the US economy recently, leading market participants to price in a slightly more hawkish rate path for the Fed over the remainder of the year. Until a few weeks ago, investors had fully priced in one more quarter-point rate hike by year-end, and also saw an 80% probability for a second one. Now though, two more rate increases have been fully factored in, and markets see a 20% chance for a third one, according to Fed funds futures.
With that in mind, it will be crucial to see how the aforementioned risk events play out in the coming week. Depending on the quality of the data and the Fed’s tone at its policy gathering, we may well see a significant repricing of these expectations. In terms of the data we receive on Monday, attention will likely fall predominantly on the core PCE price index, which is the Fed’s preferred inflation measure. Forecasts point to an acceleration in prices, with the index expected to reach 1.8% in yearly terms from 1.6% in February, something supported by a similar acceleration in the core CPI for the same month.
Should these data meet or exceed their respective forecasts – particularly the core PCE print – then the dollar could extend its latest rebound as investors become more confident in the Fed delivering three more hikes this year. Looking at dollar/yen, resistance to advances could come around the psychological 110.00 handle. Further up, sell orders may be found near 110.50, the peak of February 2.
On the downside, and in case of a disappointment in these data, support to declines in dollar/yen may be found initially near 108.50 – the area around this level was congested in early February. Further down, the 107.80 zone may stall declines, marked by the high of April 13.
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