US PCE Inflation Data and US Dollar Outlook

The Fed’s favorite measure of inflation for the month of January, the core personal consumption measure or Core PCE is due for release this afternoon. So what can investors expect from this day? The US PCE Inflation Data and US Dollar Outlook reveal.

1 March, Swissquote – The tension is mounting among investors as this indicator is closely monitored by the Fed and could, therefore, influence significantly the path of monetary policy in the US.

Indeed, the publication of January’s CPI sparked strong reactions across financial markets as market participants adjusted their positions for a stepper path of interest rate. The headline PCE is expected to have remained stable at 1.7%y/y in January, while the core measure should come in at 1.5%y/y.

US PCE Inflation Data and US Dollar Outlook

The second key event of the day is the testimony of Fed chair Powell before the Senate banking committee. We believe that Powell will be keen to soften its hawkish stance regarding the US economy. During a congressional testimony, Powell suggested that the Fed could increase borrowing rates four times this year, compared to three hikes expected by market participants and signaled by the central bank so far.

So what can investors expect from this day? On the one hand, an upside surprise in inflation could definitely trigger a dollar; however, as discussed yesterday, higher interest rates could slowly dampen US growth against the backdrop of a leveraged private sector and an already stretched federal budget.

On the other hand, Powell may use a more dovish tone today during his Senate hearing. Therefore, we believe that all-in-all the risk is skewed to the downside for the US dollar.

EURUSD Technical Levels

EUR/USD is currently trading around the bottom of its monthly range. A break of the strong 1.2165 support will open the door towards 1.20, then 1.1916 (low from January 9th). On the upside, a first resistance can be found at around 1.2350 (previous highs), then 1.2555 (high February 16th).

Indian growth wonders 

Indian quarter (October – December) Gross Domestic Product published on Wednesday provided Prime Minister Narendra Modi with a big relief, given at 7.20% (consensus at 6.90%) against July-September and April – June quarters at 6.30% and 5.70%, making it the largest quarterly growth of the year.

India becomes the fastest growing economy in relative numbers (India and China GDP 2017: 7.10% and 6.80%), as China starts seeing signs of a slowdown in consumption and manufacture (January CPI at the slowest pace since July 2017, PPI lowest rate since November 2016 and Manufacturing PMI low since July 2016).

Indian Sensex declines through the release, valued at 34’153 (-0.56%) along world equity indexes decline.


This article US PCE Inflation Data and US Dollar Outlook was written by Arnaud Masset & Vincent Mivelaz, analysts at Swissquote. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein.

This document does not constitute a recommendation to sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investments.

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