US PCE inflation meets forecasts, more details on Merkel’s case

Summary:

• US data came more or less in line with market expectations

• Angela Merkel confirms no running for another term as CDU leader and the German Chancellor

• EURUSD approaches the long term support zone

The US data concerning the personal income and spending as well as the PCE inflation for September was the only noteworthy regular release scheduled for today. Apart from that, more details on the Angela Merkel’s resignation from running for re-election as the CDU leader were revealed during the press conference.

The US PCE inflation crawled back to the Fed’s inflation target in September. Source: Macrobond, XTB Research

The data pack from the US can be named USD-positive in general. Looking at the details one can see personal spending coming in line with forecast of 0.4% increase. On the other hand, the personal income data disappointed a bit as it came in at 0.2% against expected 0.4%. However, previous releases of both gauges were revised up with income rising in August by 0.4% (previously 0.3%) and spending by 0.5% (previously 0.3%). The PCE data present as follows:

• PCE headline: 0.1% MoM, expected 0.1% MoM

• PCE headline: 2% YoY, expected 2% YoY

• PCE core: 0.2% MoM, expected 0.1% MoM

• PCE core: 2% YoY, expected 2% YoY

As one can see the price growth figures came mostly in line with forecasts with core gauge on the monthly basis being the only one to deviate from expectations. However, in that case investors were offered a minor beat therefore combining it with a revised higher personal income and spending data no one should be surprised that EURUSD headed lower in a knee-jerk move.

EURUSD moved lower following the release of the US data pack. The downward move could have been magnified by the remarks expressed during the Angela Merkel’s press conference. Source: xStation5

Apart from that, it is worth to elaborate on the Angela Merkel’s topic we have mentioned briefly in one of our earlier posts. Shortly after noon the press conference of the German Chancellor began. During the presser Merkel said that she is disappointed with the lacklustre outcome of the elections in Hesse and stressed that it can be a watershed for CDU. When it comes to her leadership of the CDU party she confirmed that she will not run for the re-election in December. Merkel pointed at Annegret Kramp-Karrenbauer, the CDU General Secretary, and Jens Spahn as candidates for the party leaders post. However, she announced that she won’t back either one of them. Moreover, Merkel said that she will not seek another term as a Chancellor when her tenure terminates in 2021. She highlighted that she wants to serve full term (until 2021) as there is a lot of work to do. On the international level she stressed Brexit and Trump’s plan to withdraw from the INF treaty as major challenges while domestically she pointed at pensions and infrastructure.

On the weekly frame EURUSD is approaching the long term support zone ranging 1.1300-1.1360 that saw some price action earlier this year as well as in 2016. Note that the pair erased more than a half of the upward move started at the turn of 2016 and 2017. Source: xStation5