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PCE & Job Claims adds to the 4 rate rise story

Market Analysis

USDJPY, H1

The dollar ticked slightly higher versus the yen noticing the uptick in core PCE prices, the Fed’s preferred measure, to 0.3%, though on a y/y basis it remained stuck at 1.5%. Initial jobless claims also sank.The 10k U.S. initial claims dropped to a 48-year low of 210k extended last week’s 9k decline in the BLS survey week to an already super-tight 220k (was 210k), as claims post a remarkable tightening into 2018 with likely help from tax reform and anticipated spending related to the recent budget bill, which is filling the void of diminishing disaster rebuilding. On a 12-month basis the PCE deflator, the Fed’s preferred measure, was steady at 1.7% y/y and still below target, with the core rate unchanged as well, at 1.5% y/y. The lack of upward pressure on the 12-month indices is good news for bonds.

The bigger currency mover on data release was USDJPY, which traded to 106.88 highs from near 106.75. Next resistance area is between 107.30-108.00, while support comes at 106.60. EURUSD meanwhile, was steady at 1.2175. Equity futures indicate a mixed Wall Street open

Meanwhile, the markets anxiously await today’s testimony by Fed Chairman Powell. Fed Chairman Powell will reprise his semi-annual testimony before the Senate Banking Committee from 10 ET. Markets will be keen to see if he tempers or walks back his references to risk of economic “overheating” in the context of trying to hit the Fed’s inflation target. NY Fed’s Dudley will also be speaking on trade and globalisation before an event sponsored by the Central Bank of Brazil from 11 ET. Coincidentally, Trump’s team will also be making an announcement on potential steel and aluminum tariffs at that time.

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Andria Pichidi

Market Analyst

HotForex

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