The eagerly awaited Core Personal Consumption Expenditures (PCE) Price Index, the US Federal Reserve’s preferred inflation gauge, is set to be released on Friday by the US Bureau of Economic Analysis (BEA) at 13:30 GMT, offering insights into the state of inflation and potential implications for monetary policy.
Investors and analysts are closely eyeing the Core PCE Price Index, excluding volatile food and energy prices, as it holds significance in shaping the Fed‘s stance on inflation. Forecasts suggest a 0.2% monthly increase in December, a slight uptick from the 0.1% recorded in November. The annual pace of growth for December’s Core PCE is projected at 3%, a slight decline from November’s 3.2%. In contrast, the headline PCE Price Index is expected to rise 2.6% year-on-year.
TD Securities analysts anticipate that the December PCE data will align with the notion of inflation deceleration. They predict the core series to advance at a near-trend 0.2% month-on-month, slightly below the core Consumer Price Index’s increase of 0.3%.
The PCE inflation data is crucial for traders and investors and is scheduled for release at 13:30 GMT. This monthly Core PCE Price Index is particularly significant for the Fed, providing a clear perspective on underlying inflation without the distortion of base effects.
While the quarterly figures were already incorporated into the Gross Domestic Product (GDP) report published on Thursday, market participants will be closely examining the underlying details, specifically Personal Spending and Personal Income readings for December. Personal Spending is expected to rise by 0.4% monthly, following a 0.2% increase in November, while Personal Income is forecasted to increase by 0.3%. Any deviation from these expectations could influence the immediate market reaction.
Market analysts suggest that if both data releases disappoint, indicating weakening consumption, it may weigh on the US Dollar (USD). Conversely, upbeat figures are likely to provide support to the USD in the short term.
For EUR/USD, technical analyst Eren Sengezer highlights key levels to watch. The 200-day Simple Moving Average at 1.0850 is identified as a pivotal level, with potential bearish targets at 1.0780-1.0770 and 1.0700 if this level acts as resistance. On the upside, resistance is noted at 1.0930-1.0950, followed by 1.1000.
As traders await the PCE inflation report, the market’s reaction to the data, alongside other economic indicators, will shape near-term sentiment and potential currency movements.