US Personal Consumption Price Index (IPCE)
Highlights on Friday’s US economic agenda are the publication of the Personal Consumption Expenditure Price Index (IPCE), expected later in the early US session at 13:30 GMT. The gauge is forecast to rise 0.3% in November, matching the previous month’s reading. The annual rate is forecast to have slowed to 5.3% from 6% in October. For its part, the core PCE price index, the Fed’s preferred measure of inflation, likely declined to a year-over-year rate of 4.7% in November, from 5% previously.
Analysts at TD Valores Bursátiles (TDS) offer a brief preview of the report, writing: “We expect core PCE prices to have advanced at a pace of 0.2% MoM, according to consensus, for the second consecutive month in November (also coinciding with core CPI data).The year-on-year rate likely fell to 4.6% from 5.0% in October, suggesting that prices continue to moderate but remain elevated.”
How could it affect EUR/USD?
Ahead of the key data release, the recovery in global risk sentiment prompts some selling around the safe-haven dollar and helps EUR/USD regain some positive traction. Weaker inflation data could raise bets for a less aggressive Fed tightening. This would further boost investor appetite for riskier assets and put additional downward pressure on the dollar.
Conversely, stronger PCE data could fuel speculation that the Fed will maintain its ultra-aggressive monetary policy and put pressure on US Treasury yields. This would be enough to trigger a new short movement around the US dollar and attract aggressive selling around the EUR/USD pair. However, the data is likely to infuse some volatility and provide a significant boost.
Eren Sengezer, Editor at FXStreet, describes important technical levels for trading EUR/USD: “The pair is facing strong support around 1.0580, where the 23.6% Fibonacci retracement of the last uptrend lines up. and the 100 Simple Moving Average (SMA) on the four-hour chart. Below that level, 1.0530 (38.2% Fibonacci retracement) could be considered next support before 1.0500.”
“To the upside, the pair could target 1.0680 (uptrend end point) and 1.0700 (psychological level) could be tested once EUR/USD breaks above 1.0620 (20-period SMA, 50-period SMA) and confirm it as support,” Eren adds later.
About the US PCE Price Index
The Personal Spending published by the Bureau of Economic Analysis of the Department of Commerce is an indicator that measures the total spending of individuals. The level of spending can be used as an indicator of consumer optimism. It is also considered a measure of Economic Growth: While personal spending stimulates inflationary pressures, it could lead to a rise in interest rates. A high reading is positive (or bullish) for the 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.
