Core PCE Rises

The US Dollar is catching a bid ahead of the weekend following yesterday’s data. The core PCE price index was seen rising to 0.4% from the prior month’s 0.1% reading. Given that the data is used by the Fed as a key inflation gauge, the release is seen as further evidence that the Fed will refrain from rate cuts near-term. On the back of a hotter-than-forecast CPI reading a fortnight ago, the inflationary environment remains difficult for the Fed and suggests that the Fed is likely to continue sticking to its message of keeping rates at current levels for as long as necessary in order to drive inflation sustainably back to target.

Mixed Fed Commentary

Speaking after the release, Fed’s Mester said that recent inflation readings had not changed her view that the Fed will press ahead with 3 rate cuts this year. Mester warned that while the inflation picture was bumpy, should the economy continue to develop as expected, three rate cuts this year was still appropriate. Speaking earlier this week, Fed’s Williams warned that the Fed would need to remain patient with easing and while rate cuts this year were still expected, there was still clearly further work to be done on bringing inflation down.

Near-Term Outlook

For now, the picture remains mostly the same: the Fed is on course to cut rates this year but while inflation remains sticky at current levels, the bank is happy to delay this tightening as necessary. The market is currently pegging a first cut by July with this timing vulnerable to alteration as per incoming inflation data.

Technical Views


The latest test of the 103.48 level has seen the market finding buying interest once again. While this level holds, the focus is on a fresh push higher and a further test of the 104.95 resistance. 105.91 sits above as the next bull target.