US PCE Inflation Cooled, Markets Steady, Dollar Sluggish

The markets are steady after US data showed further cooling in headline and core PCE inflation. While the decline in Dollar has been slowing somewhat, there is no committed buying for a sustainable rebound. The greenback is likely to end the week mixed. Trade might be relatively subdued for the rest of the session. Traders will likely hold their bets until next week’s main events.

In Europe, at the time of writing, FTSE is down -0.01%. DAX is down -0.13%. CAC is down -0.29%. Germany 10-year yield is up 0.025 at 0.242. Earlier in Asia, Nikkei rose 0.07%. Hong Kong HSI rose 0.54%. Singapore Strait Times rose 0.50%. Japan 10-year JGB yield rose 0.0198 to 0.485.

US PCE price index slowed to 5.0% yoy in Dec, core PCE down to 4.4% yoy

US personal income rose 0.2% mom or USD 49.5B in December, matched expectations. Spending dropped -0.2% mom or USD -41.6B.

PCE price index rose 0.1% mom while core PCE price index (excluding food and energy) rose 0.3% mom. Prices for goods was down -0.7% mom and prices for services up 0.5% mom. Foods prices rose 0.2% mom and energy prices dropped -5.1% mom.

From the same month one year ago, the PCE price index slowed from 5.5% yoy to 5.0% yoy. Excluding food and energy, core PCE price index slowed from 4.7% yoy to 4.4% yoy. Prices for goods rose 4.6% yoy, services up 5.2% yoy. Foods prices rose 11.2% yoy while energy prices rose 6.9% yoy.

Japan Tokyo CPI core rose to 3.4% yoy, highest in 42 years

In Japan, Tokyo CPI core (all items ex-fresh food), accelerated from 4.0% yoy to 4.3% yoy in January, above expectation of 4.2% yoy. That’s also the fastest annual increase in nearly 42 years since May 1981.

Headline CPI (all items) rose from 4.0% yoy to 4.4% yoy, matched expectations. CPI core-core (all items ex-fresh food, energy) rose from 2.7% yoy to 3.0% yoy.

NZ ANZ business confidence rose to -52, inflation pressures remains intense

New Zealand ANZ Business Confidence improved from -70.2 to -52.0 in January. Own activity outlook rose form -25.6 to -15.8.

Looking at some details, exports intentions rose from -10.0 to -5.4. Investment investment intentions rose form -20.5 to -13.7. Employment intentions rose from -16.3 to -11.1.Pricing intentions rose from 59.1 to 62.4. Cost expectations rose from 84.4 to 91.3. Profit expectations rose from -52.7 to -42.6. Inflation expectations dropped from 6.23 to 5.99.

ANZ said: “Inflation pressures remain intense. Pricing intentions rose 3 points, and cost expectations rose 7 points. Inflation expectations remain stuck around the 6% mark. There’s good reason for the RBNZ to keep hiking a while yet (we are picking +50bp in February).”

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2360; (P) 1.2396; (R1) 1.2446; More…

GBP/USD is still gyrating in very tight range and intraday bias remains neutral. On the downside, firm break of 1.2252 minor support will turn bias to the downside, and extend the corrective pattern from 1.2445 with another falling leg. On the upside, decisive break of 1.2445 will confirm resumption of whole rise from 1.0351. Next target will be 1.2759 fibonacci level.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Economic Indicators Update