USD Falls After Higher PCE Inflation Figures

Traders have been looking at two main indicators for guidance regarding FED rate hikes among others, inflation and employment. Main inflation numbers such as the CPI (consumer price index) has slowed down but the other inflation indicators still point up.

The PCE inflation numbers in the advance US Q1 GDP report yesterday were high and today’s core PCE price index came above expectations, with last month’s number also being revised higher. But, the USD declined after the report. Although yesterday’s high numbers may have put an upward bias into this data point.

I’m not surprised to see the revisions higher in the February inflation figures, given the GDP print yesterday and the GDP price index and I don’t think the market will be overly shocked by these numbers. Notably, headline inflation is falling quickly and could fall below 4% as soon as next month.

US Core PCE Price Inflation Report for March 2023

• March PCE core inflation 4.6% vs 4.5% expected
• Prior was +4.6% (revised to 4.7%)
• PCE core MoM +0.3% vs +0.3% expected
• Prior MoM +0.3%
• Headline inflation PCE +4.2% vs +4.6% prior (Prior revised to 4.7%)
• Deflator MoM +0.1% vs +0.3% prior

Consumer spending and income for March:

• Personal income +0.3% vs +0.2% expected. Prior month +0.3%
• Personal spending 0.0% vs -0.1% prior
• Real personal spending 0.0% vs -0.1% expected (prior +0.2%)

The dollar didn’t move much on these numbers at first, while starting to slide lower later, which makes you think that the hawkish tilt was already priced in. The FED is still on track to hike next week but the question will be how explicitly they hint at a pause beyond that. Yields are also lower after the data in a strong sign that the market is no longer worried about inflation. USD/CHF declined around 80 pips following the report, after failing to break above the 100 SMA (green) on the H4 chart.

USD/CHF Live Chart