Inflation and Economic Data: May's Numbers and Market Expectati
The May PCE deflator, which is the preferred inflation measure of the Fed, increased by +0.1% on a monthly basis and +3.8% on a yearly basis, meeting market expectations. The core PCE deflator for May also rose by +0.3% on a monthly basis, in line with market expectations. However, the year-on-year core PCE deflator for May increased by +4.6%, slightly below the market's expectation of +4.7%.
The report on the deflator indicates that inflation is moving in the right direction, as the headline deflator eased to +3.8% on a yearly basis from the revised +4.3% in April, and the core deflator eased to +4.6% on a yearly basis from April's +4.7%. Nevertheless, the Fed remains concerned about persistent core inflation, as the core deflator remains significantly high at +4.6% on a yearly basis, well above the Fed's inflation target of +2%.
In May, U.S. personal income increased by +0.4% on a monthly basis, slightly higher than the expected +0.3%, although April's figure was revised downward to +0.3% from +0.4%. U.S. personal spending in May increased by +0.1% on a monthly basis, slightly lower than expectations of +0.2%, and April's figure was revised downward to +0.6% from +0.8%. Real personal spending in May remained unchanged compared to the previous month, following a revised increase of +0.2% in April.
The final-June University of Michigan U.S. consumer sentiment index was revised upward by +0.5 points to reach a four-month high of 64.4, surpassing expectations of no revision. This revision indicates an increase of +5.2 points from May's level of 59.2.
The market currently predicts an 81% probability of a +25 basis point rate hike at the upcoming FOMC meeting on July 25-26. By November, the market anticipates a peak funds rate of 5.42%, suggesting an overall rate hike of +33 basis points from the current effective federal funds rate of 5.07%.
China's PMI reports overnight were generally in line with market expectations, but they reinforced the belief that China's economy is losing momentum following the initial post-Covid surge. China's manufacturing PMI for June increased by +0.2 points to 49.0, meeting market expectations but remaining below the expansion-contraction threshold of 50. China's non-manufacturing PMI for June declined by -1.3 points to 53.2, weaker than the market's expectation of a decline to 53.5.
The June Eurozone CPI report showed a monthly increase of +0.3%, in line with market expectations. On a yearly basis, the June CPI decreased to +5.5% from May's +6.1%, slightly below the market's expectation of +5.6%. The June core CPI slightly rose to +5.4% on a yearly basis from May's +5.3%, but it was slightly weaker than the market's expectation of +5.5%.
XAUUSD BUY LIMIT 1912 - 1914💯💯
✅ TP1: 1918
✅ TP2: 1923
✅ TP3: 1927
🛑 SL: 1907
The report on the deflator indicates that inflation is moving in the right direction, as the headline deflator eased to +3.8% on a yearly basis from the revised +4.3% in April, and the core deflator eased to +4.6% on a yearly basis from April's +4.7%. Nevertheless, the Fed remains concerned about persistent core inflation, as the core deflator remains significantly high at +4.6% on a yearly basis, well above the Fed's inflation target of +2%.
In May, U.S. personal income increased by +0.4% on a monthly basis, slightly higher than the expected +0.3%, although April's figure was revised downward to +0.3% from +0.4%. U.S. personal spending in May increased by +0.1% on a monthly basis, slightly lower than expectations of +0.2%, and April's figure was revised downward to +0.6% from +0.8%. Real personal spending in May remained unchanged compared to the previous month, following a revised increase of +0.2% in April.
The final-June University of Michigan U.S. consumer sentiment index was revised upward by +0.5 points to reach a four-month high of 64.4, surpassing expectations of no revision. This revision indicates an increase of +5.2 points from May's level of 59.2.
The market currently predicts an 81% probability of a +25 basis point rate hike at the upcoming FOMC meeting on July 25-26. By November, the market anticipates a peak funds rate of 5.42%, suggesting an overall rate hike of +33 basis points from the current effective federal funds rate of 5.07%.
China's PMI reports overnight were generally in line with market expectations, but they reinforced the belief that China's economy is losing momentum following the initial post-Covid surge. China's manufacturing PMI for June increased by +0.2 points to 49.0, meeting market expectations but remaining below the expansion-contraction threshold of 50. China's non-manufacturing PMI for June declined by -1.3 points to 53.2, weaker than the market's expectation of a decline to 53.5.
The June Eurozone CPI report showed a monthly increase of +0.3%, in line with market expectations. On a yearly basis, the June CPI decreased to +5.5% from May's +6.1%, slightly below the market's expectation of +5.6%. The June core CPI slightly rose to +5.4% on a yearly basis from May's +5.3%, but it was slightly weaker than the market's expectation of +5.5%.
XAUUSD BUY LIMIT 1912 - 1914💯💯
✅ TP1: 1918
✅ TP2: 1923
✅ TP3: 1927
🛑 SL: 1907
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