- The US Dollar trades lower on softer PCE and spending numbers.
- Markets are seeing no reason to believe the rate hike calls from Fed officials.
- The US Dollar Index trades towards lower levels at 104.00.
The US Dollar (USD) trades lower on Friday ahead of the US trading session with US Personal Consumption Expenditures (PCE) out of the way. Although no big surprises, the confirmation that disinflation is still on track is good confirmation. Traders are now comfortable to ignore recent calls and concerns from Fed officials to stark talking about a rate hikes.
On the economic data front, markest no big data elements ahead for this Friday. Next week promises to be a bit more eventful with the US Jobs Report on Friday and a big slew of data set to be released in the runup towards the number. .
Daily digest market movers: PMI massacre
- The Personal Consumption Expenditures Price Index for April:
- The monthly Headline PCE came in as expected at 0.3%, unchanged, while the yearly headline PCE was steady as well at 2.7%.
- The monthly core PCE went from 0.3% in March to 0.2% for April. Yearly core PCE remained unchanged at 2.8%.
- Personal Income fell to 0.3%, slowing from the 0.5% a month earlier.
- Personal Spending fell to 0.2% from 0.7%.
- The Chicago PMI for May came in lower than the previous 37.9, at 35.4, substantially lower than the 41 forecast.
- Federal Reserve Bank of Atlanta President Raphael Bostic will close off this Friday by delivering a speech at the Augusta Technical College's spring commencement ceremony near 22:15 GMT.
- Equities are loving the softer PCE number with both Europe and the US main indices in the green.
- According to the CME Fedwatch Tool, Fed Fund futures pricing data suggests a 49.0% chance for keeping rates unchanged in September, against 45.1% chance for a 25 basis points (bps) rate cut and a 5.4% chance for an even 50 bps rate cut. A marginal 0.5% price in an interest rate hike.
- The benchmark 10-year US Treasury Note trades around 4.49%, and is falling further.
US Dollar Index Technical Analysis: Is the Fed in a policy mistake?
The US Dollar Index (DXY) has tossed the coin and it fell in disfavor of the Greenback. Clear devaluation for the US Dollar with disinflation back on track. The markets can now brush off nearly in full the recent remarks from some Fed officials saying that a rate hike might be needed first.
On the upside, the DXY index reclaimed the key levels: the 55-day Simple Moving Average (SMA), currently at 104.98, and the 105.00 big round level. It will be important to see if these levels hold support should the US data weaken. Once that is proven, look for 105.52 and 105.88.
On the downside, the 200-day SMA at 104.43 and the 100-day SMA around 104.40 are the last line of defence. Once that level snaps, an air pocket is placed between 104.30 and 103.00. Should the US Dollar decline persist, the low of March at 102.35 and the low from December at 100.62 are levels to consider.
