In a recent report from the US Bureau of Economic Analysis, the Core Personal Consumption Expenditures (PCE) Price Index, a crucial measure of inflation and the Federal Reserve’s preferred gauge, showed a decline to 2.9% in December. This figure, although slightly below the market forecast of 3%, reflects a softening from November’s 3.2%.
Market Reaction and USD Dynamics
Following the release of the PCE inflation data, the US Dollar Index exhibited a modest recovery from daily lows. The immediate market reaction saw the index losing 0.12% on the day at 103.35. This nuanced movement signifies the impact of the inflation report on currency markets, with traders adjusting positions based on the revealed figures.
USD Performance Against Major Currencies
A closer look at the percentage changes of the US Dollar (USD) against major currencies this week reveals a dynamic landscape. While the USD experienced a 0.28% gain against the Euro (EUR), it saw declines against the British Pound (GBP), Australian Dollar (AUD), and Swiss Franc (CHF). This intricate dance of currency pairs highlights the sensitivity of the USD to inflation data and economic indicators.
| Currency | Percentage Change (Against USD) |
|---|---|
| USD | N/A |
| EUR | 0.28% |
| GBP | -0.25% |
| CAD | -0.01% |
| AUD | 0.06% |
| JPY | -0.20% |
| NZD | 0.23% |
| CHF | -0.45% |
Anticipating Fed’s Response and USD Fragility
The Core PCE Price Index, excluding volatile food and energy prices, is a key metric shaping the Federal Reserve’s policy decisions. With the index softening to 2.9%, analysts speculate on the Fed’s stance in the upcoming months. Markets currently foresee a likelihood of the Federal Reserve maintaining the policy rate unchanged in January and March.
Technical Outlook for EUR/USD
In the aftermath of the PCE inflation report, the EUR/USD pair faces technical considerations. The Relative Strength Index (RSI) on the daily chart indicates a lack of buyer interest, with the 200-day Simple Moving Average (SMA) acting as a pivotal level at 1.0850. Traders are closely monitoring key levels, such as 1.0930-1.0950, for potential resistance and 1.0780-1.0770 as potential bearish targets.
Focus on Personal Spending and Income
While the PCE inflation figures may not yield significant surprises, attention shifts to underlying details like Personal Spending and Personal Income for December. The market awaits these indicators for insights into consumption trends, with disappointing figures potentially weighing on the USD, while upbeat data could provide support in the short term. As the USD navigates these dynamics, global markets remain vigilant for signals of economic strength or vulnerability.
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