MARKETS AWAITS U.S. CORE PCE

• AN OVERVIEW OF KEY U.S. ECONOMIC DATA FOR THE WEEK
• A GLANCE ON DOLLAR INDEX (DXY)
• U.S. CORE PCE OVERVIEW AND PATH TO FUTURE RATE CUTS

AN OVERVIEW OF KEY U.S. ECONOMIC DATA FOR THE WEEK

This is a crucial week for the U.S, with markets witnessing series of economic data releases that could influence Fed's rate decisions before the year end. Recall the next FOMC policy meeting is scheduled for 6th and 7th of November 2024 just a day after the election. With the election just a week away, the USD has been bullish in recent days, alongside other safe haven like Gold. On Tuesday the 29th of Oct. 2024, the week started on a positive note with higher-than-expected consumer confidence at 108.7 compared to 99.5. However, JOLTs data came in lower at 7.44 million versus 7.98 million. On Wednesday, ADP employment figures surged by 123,000 above forecasts, while advance GDP showed a decline of -0.2%. Later today at 4:30pm GMT+4, markets await, Core PCE m/m, employment cost index q/q and weekly unemployment claims at 0.3%, 0.9% and 229k respectively. While we round off the week tomorrow being 1st of November 2024 with Average hourly earnings m/m, Non-farm payroll, unemployment rate and manufacturing PMI with forecasts at 0.3%, 108k, 4.1% and 47.6 respectively. The data in view serves as catalyst with the tendency to drive the USD.

A GLANCE ON DOLLAR INDEX (DXY)

The above data releases and other fundamentals caused some volatility on the greenback and hence the dollar index continuous it’s surge. The DXY rallied and is currently resisted around 104.574. Meanwhile, we witnessed a fake out of that area on the 29th of October being last Tuesday, the index is currently catching its breath around 103.976, while waiting for the next catalyst.  If we witness a positive Core PCE and Job report, the bullish momentum on the DXY would likely continue with potential target around 105.00 levels, on the other hand, if we see negative readings, then the place of retracement and further tank can’t be ruled out. Meanwhile a mix in data isn’t ruled out too as per technical analyst.

            U.S. CORE PCE OVERVIEW AND PATH TO FUTURE RATE CUTS

The U.S. Core PCE (Personal Consumption Expenditures) Price Index as a key economic indicator used to measure inflation, reflects changes in the prices of goods and services (excluding food and energy) purchased by consumers. The Core PCE being closely monitored by the Fed, provides insight into underlying inflation trends and helps guide monetary policy decisions. The U.S core PCE price index, rose by 0.1% month over month in August 2024. This increase fell below market expectations of 0.2% and marked a decline from the 0.2% rise observed in June and July 2024. Today’s reading is forecasted at 0.3%. If we witness an increase in the Core PCE today, it suggests rising inflation, which could encourage the Fed to consider tightening policies in subsequent meetings, while a decrease might indicate lower inflation pressures, potentially encouraging more accommodative policy. The FOMC will meet on the 6th and 7th of next month, current expectations lean toward holding the federal funds rate steady. After a recent bumper rate cut of 50bps in September, which reduced the target range to 4.75-5% after about four years of maintaining high rate at 5.50bps. Fed Chair signals that they (FOMC) are closely monitoring economic indicators to determine the need for further adjustments. Hence the bumper cut of September isn’t a “preset course”. However, despite progress in bringing inflation down, it remains above the Fed's 2% target and currently seats at 2.4%. Factors like ongoing labor market resilience and consumer demand growth keep the Fed cautious. Analysts believe that the Fed is approaching a period of stability, but Powell have emphasized they are prepared to adjust rates if inflation pressures reaccelerate or if economic data indicate risks to their objectives of stable inflation and maximum employment.