US PCE Data Beats Expectations - Price Pressures Delay Rate Cut Plans

PCE Price Index Beats Expectations, Delaying Fed Cuts

Headline PCE for March bushed expectations of 2.6%, coming successful higher astatine 2.7% portion halfway PCE besides amazed to the upside, printing successful enactment with the 2.8% fig witnessed for February but rising supra statement expectations of 2.6%.

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The March PCE information is the latest successful a drawstring of hotter than anticipated ostentation readings which person emerged successful 2024, propping up the US dollar and forcing the Fed to recalibrate their forecasts.

Implied Fed Rate Cuts (Measured successful Basis Points) for Each Remaining Meeting successful 2024

Source: Refinitiv, prepared by Richard Snow

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Economic Growth Becoming a Concern but the Fed Remains Focused connected Price Pressures

US depletion remains strong, the labour marketplace is robust but yesterday revealed a crisp driblet successful growth (1.6%) erstwhile compared to estimates (2.5%) and the forecast from the Atlanta Fed (2.7%). The concerning information followed conscionable days from a amazingly disappointing PMI fig for US manufacturing which narrowly entered into a contraction, although, it is the flash information truthful markets volition beryllium looking retired for immoderate upward revisions to the last print. Still, aboriginal signs person present emerged that the US system is possibly not arsenic impervious to restrictive rates arsenic was erstwhile thought.

The quarter-on-quarter (QoQ) PCE prices that are released alongside US GDP yesterday revealed a notable astonishment – continuing the ongoing taxable of stubborn inflation, which immoderate whitethorn argue, is re-accelerating. The existent GDP people revealed a sizeable miss, initially sending the dollar little but the determination was short-lived owed to the effect of the higher terms data.

Immediate Market Response to US PCE Data

The marketplace effect successful the moments pursuing the information revealed a insignificant determination little for the greenback, with galore having priced successful the imaginable of a higher ostentation number. A wide measurement of USD performance, the US Dollar Basket (DXY), dropped a tad – continuing this week’s taxable involving a hazard rally which has benefitted the likes of AUD and GBP.

Shorter-term US yields declined arsenic good but the moves person been contained arsenic we look up to the FOMC rate decision connected Wednesday adjacent week. S&P 500 futures roseate up of what is expected to beryllium a somewhat little unfastened this greeting contempt quality of Alphabet announcing its archetypal dividend.

Multi-Asset Reaction (US Dollar Index, US-2 Year Treasury Yields, S&P 500 Futures)

Source: TradingView, prepared by Richard Snow

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--- Written by Richard Snow for DailyFX.com

Contact and travel Richard connected Twitter: @RichardSnowFX