Good Friday, PCE deflator, end of month and quarter

Today is Good Friday and stock exchanges in many parts of the world are closed. Volatility in the currency market should decrease hour by hour. Today is the last day of the month and the end of the first quarter for financial markets. Despite this, the markets will learn today what the report on Americans' spending in March was. However, we will know the full reaction to this publication only after Christmas.

Local low on the Eurodollar

Volatility on Wall Street was modest on Thursday. The SP500 and Dow Jones gained approximately 0,12 percent, in turn Nasdaq Composite lost the same value. The German Dax moved up by a cosmetic 0,08%. Gold set a new record of around USD 2235 per troy ounce. The rate of the main currency pair fell after the retail sales data from Germany to 1,0775. In the second part of the day, as a result of data from the USA, there was an upward rebound, which resulted in the quotations temporarily rising above 1,08. This morning, the currency pair set a new local low below 1,0770. The price of cocoa ($9700 per tonne) has decreased slightly but is still close to historical records. The commodity has had an impressive rally. It has gained over 130% since the beginning of the year. and from March 2023, over 235 percent.

Published data on CBA The USA in the fourth quarter of 2023 turned out to be higher than expected. The annualized result indicated that the American economy was growing at a rate of 3,4 percent, while the forecast indicated 3,2 percent. Private consumption also turned out to be better (3,3%). The GDP deflator - showing how much of the change in GDP in a given year resulted from changes in the price level - was at 1,7%. The PCE deflator showing the average change in prices of domestic consumer goods (excluding energy and food prices) remained at the level of 2%. (an increase to 2,1% was expected). The weekly labor market data did not bring any breakthrough and the number of benefit applications amounted to 210, slightly less than the market consensus.

Waiting for important data from the US

The American consumer is still in a good mood. At least that's what the University of Michigan report says. The main index increased to 79,4 points. with 76,9 points previously. Both short-term (2,9%) and long-term (2,8%) inflation expectations decreased. After 15:00 p.m. the dollar began to gain, which resulted in a decline EUR / USD again below 1,08.

Retail sales from Germany surprised negatively. This is the 24th month in a row of negative annual dynamics. The result was -2,7%. was definitely worse than forecasts (-0,9%) and the previous value (-1,4%). The monthly dynamics was also negative, reaching -1,9%. Here, the forecasts showed an increase of 0,4%. The euro reacted with weakening to the publication, which contributed to the decline in the eurodollar rate to around 1,0775.

Today, despite the holiday mood and closed stock markets, we will receive an important report on Americans' spending, which includes information on the Fed's preferred measure of inflation. Higher readings of the PCE deflator and PCE core indicators will strengthen the dollar and perhaps the "descending" of the main currency pair below 1,08 will prove to be permanent, at least for some time. It is true that June is the likely date of the first Fed rate cut at this point, but higher inflation readings will mean that the market may reduce the chances of such a scenario happening in its valuation.

Source: OANDA TMS Brokers