📆 US PCE data for April due at 1:30 pm BST today
Release of the US PCE inflation data for April is a key macro release of the day. Report will be released at 1:30 pm BST and will also include monthly data on personal income and spending. Data is expected to show no changes to annual pace of headline and core inflation. However, even if the data surprises dovishly, it may not have too much impact on Fed's rate path. Let's have a quick look at what to expect from today's data!
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appWhat markets expect?
US PCE data for April is expected to show both headline and core inflation measures staying unchanged at levels from March. Also, pace of monthly price increases is expected to be the same as in the previous month. Having said that, inflation is expected to remain above Fed's 2% target. Should US inflation to run at such a monthly pace as now, it will not fall back to central banks target this year, and will likely re-accelerate in the second half of 2024 due to base effects.
US, data pack for April
- Headline (annual). Expected: 2.7% YoY. Previous: 2.7% YoY
- Headline (monthly). Expected: 0.3% MoM. Previous: 0.3% MoM
- Core (annual). Expected: 2.8% YoY. Previous: 2.8% YoY
- Core (monthly). Expected: 0.3% MoM. Previous: 0.3% MoM
- Personal income. Expected: 0.3% MoM. Previous: 0.5% MoM
- Personal spending. Expected: 0.3% MoM. Previous: 0.8% MoM
Source: BLS, Macrobond, XTB Research
What will the reading mean for Fed?
While PCE data is released with a bigger lag than CPI data, it is always watched closely. This is because it is Fed's preferred inflation measure and the 2% target relates to core PCE. As we have said already in the previous paragraph, inflation continuing at current monthly pace or even slower at 0.2% MoM or 0.1% MoM throughout the rest of the year will not result in Fed's target being achieved. Having said that and keeping recent hawkish comments from Fed members, chance for Fed deciding to cut rates earlier is slim, even if data surprises to the downside.
Current market pricing suggests that the first potential timing for Fed rate cut is September meeting. However, markets see just an around-50% chance of such a move, and unless we see a big dovish surprise in the data, Q4 2024 or even Q1 2025 could be more likely timing for the first rate reduction.
Fed is not expected to cut rates before September, with market pricing for September meeting showing an almost 50-50 split between cutting rates or keeping them unchanged. Source: xStation5
A look at US500 chart
While today's PCE release is unlikely to change Fed's view on the need and timing for rate cuts, deviations from market expectations may trigger some short-term price moves. A lower-than-expected, or dovish, reading may support US indices, and allow S&P 500 futures (US500) to recover some of recent losses.
Taking a look at US500 chart at H1 interval, we can see that the index has been pulling back recently and is now testing a short-term support zone in the 5,240 pts area. Should PCE come in dovish and provide fuel for recovery on the index, the first near-term resistance to watch can be found in the 5,265 pts area, where previous price reactions and 50-hour moving average can be found. On the other hand, a hawkish, or higher-than-expected, reading could push the pair below 5,240 pts as market pricing will likely switch more towards December cut rather than September.
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
