- The price index of the underlying personal consumption is expected to increase a monthly 0.1% and 2.5% year -on -year in April.
- Markets expect the Federal Reserve to maintain monetary policy without changes in June.
- Annual PCE inflation is expected to fall to 2.2%.
The United States Economic Analysis Office (BEA) will publish Friday at 12:30 GMT the data of the Personal Consumption Expenditure Index (PCE) for April. This index is the preferred inflation measure of the Federal Reserve (FED).
It is projected that the underlying PCE price index, which excludes volatile food and energy prices, increases 0.1% in monthly terms in April, after remaining unchanged in March. In the last twelve months, the underlying PCE inflation is expected to fall to 2.5% from 2.6%. Meanwhile, the general annual inflation of the PCE is expected to decrease 2.2% from 2.3% in this period.
Anticipating PCE: Perspectives on the key metric of Fed inflation
PCE inflation data is usually considered a great promoter of the market because they are taken into account by Fed officials by deciding the next policy movement. During the Press Conference after the May meeting, the president of the FED, Jerome Powell, said that inflation remains above its objective and added that they expect the upward pressure to persist. Citing “a lot of uncertainty about tariffs,” Powell argued that the right thing is to expect more clarity before taking the next step in politics.
By anticipating the PCE inflation report, TD Securities said: “We hope that the prices of the underlying PCE will be maintained in April, increasing 0.1%m/m after having remained flat in March, although last month will be reviewed up. We also hope that personal spending returns to the average after anticipation led to an increase of 0.7% m/m in March. “
The president of the Fed in New York, John Williams, said at the beginning of the week that he wants to prevent inflation from becoming highly persistent because that could become permanent. Meanwhile, the president of the Fed of Minneapolis, Neel Kashkari, said it supports to keep interest rates until there is more clarity about the impact of the highest tariffs on inflation.
Economic indicator
Underlying personal consumer expenses index (annual)
The Personal Consumption Expenditure Index (PCE), published monthly by the US Economic Analysis Officemeasures the changes in the prices of goods and services bought by consumers in the United States (USA). The PCE price index is also the preferred inflation indicator of the Federal Reserve (FED). The interannual reading compares the prices of the goods in the month of reference with the same month of the previous year. The underlying reading excludes the most volatile components of food and energy to give a more accurate measurement of pressures on prices. Generally, a high reading is bullish for the US dollar (USD), while a low reading is bassist.
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Next publication:
old May 30, 2025 12:30
Frequency:
Monthly
Dear:
2.5%
Previous:
2.6%
Fountain:
US Bureau of Economic Analysis
After publishing the GDP Report, the US Economic Analysis Office publishes the data of the Personal Consumer Expenses Price Index (PCE) together with monthly changes in personal expenses and personal income. FOMC policies formulators use the basic annual PCE price index, which excludes volatile food and energy prices, such as their main inflation indicator. A stronger reading than expected could help USD overcome their rivals, as it would insinuate a possible radical change in the forward orientation of the Fed and vice versa.
How will the EUR/USD -consumption spending price index affect?
Market participants are likely to react to unexpected reading in the monthly underlying personal consumption expenditure rate, which is not distorted by base effects. A figure of 0.3% or higher m/m could support the US dollar (USD) with an immediate reaction. On the other hand, a 0% reading or a negative figure could have the opposite effect on the performance of the USD against its main rivals.
According to the CME Fedwatch tool, markets currently see virtually no possibility of a Fed fees cut in June, while they value about 25% probability of a cut in July. Therefore, market positioning suggests that the USD has some space for the rise if the monthly reading of the PCE surprises up. On the contrary, investors could reevaluate the probability of a rate reduction in July if a weak figure of the PCE relieves concerns that inflation remains persistent.
Eren Sengezer, principal analyst of the European session at FXSTERET, shares a brief technical perspective for the EUR/USD:
“The indicator of the Relative Force Index (RSI) in the daily chart remains slightly above 50, and the EUR/USD fluctuates above the simple mobile average (SMA) of 20 days, reflecting a lack of interest by the vendors. Downward, 1,1200 (fibonacci setback of 23.6% of the upward trend from January to April, lower limit of the ascending regression channel) as the first support before 1,1015-1.1000 (fibonacci setback of 38.2%, round level). “
“Looking north, resistance levels could be found in 1,1400 (static level), 1,1500 (static level, round level) and 1,1575 (maximum of April 21).”
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
