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2:52 PM · 20 December 2024

➡️US500 pares losses to 0.7%

US equities trimmed losses after the release of softer-than-expected Personal Consumption Expenditures (PCE) inflation data, bolstering expectations for potential interest rate cuts by the Federal Reserve.

Headline PCE inflation rose to 2.4% year-on-year, undershooting market and Fed forecasts of 2.5%. Core PCE inflation, which excludes volatile food and energy prices, held steady at 2.8% year-on-year.


Source: Macrobond, XTB

The lower-than-anticipated inflation figures have fuelled speculation of monetary easing despite the hawkish tone struck by the Federal Reserve at its most recent policy meeting. Markets are now pricing in a near 60% probability of a rate cut as early as March, and anticipate 1.7 cuts by the end of next year.

While the US economy remains robust, lower interest rates are generally viewed as supportive for equity markets. The US500, which had earlier declined by as much as 1.3%, pared its losses to 0.7% following the PCE release, climbing back above the 5,900-point level. The key support level at the 61.8% Fibonacci retracement of the recent upward trend has held. A rebound in Treasury note (TNOTE) prices has also been observed.


Source: xStation5

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