Dollar Falters on Soft PCE Inflation Data, Sterling Rises on Retail Sales

Fresh selloff is seen in Dollar in early US session after lower than expected headline and core PCE inflation readings. While another month of progress might still be insufficient to prompt Fed for an early rate cut, at least, things are heading in the right direction. The greenback is set to end as the worst performer for the week. The only question is whether it could stage a recovery against Yen in the final ours to climb one position up.

Sterling was lifted by stronger than expected retail sales data today, but it’s still lagging behind others for the week, just performing better against Dollar and Yen. Swiss Franc is currently the leader, followed by Aussie and Kiwi. Canadian Dollar is mixed, and GDP disappointment is certainly giving no help.

In Europe, at the time of writing, FTSE is up 0.04%. DAX is up 0.16%. CAC is up 0.16%. Germany 10-year yield is up 0.0003 at 1.964. UK 10-year yield is down -0.0332 at 3.502. Earlier in Asia, Japan 10-year JGB yield rose 0.0333 to 0.626. Nikkei rose 0.09%. Hong Kong HSI fell -1.69%. China Shanghai SSE fell -0.13%. Singapore Strait Times rose 0.89%.

Merry Christmas to our readers. We’ll be back on December 27.

US PCE slows to 2.6% in Nov, core PCE down to 3.2%, miss expectations

US personal income rose 0.4% mom or USD 81.6B in November, matched expectations Personal spending rose 0.2% mom or USD 46.7B, below expectation of 0.3% mom.

PCE price index fell -0.1% mom, below expectation of 0.0% mom. Core PCE price index (excluding food and energy)rose 0.1% mom, below expectation of 0.2% mom. Goods prices fell -0.7% mom while services prices rose 0.2% mom. Foods prices decreased -0.1% mom and energy prices decreased -2.7% mom.

From the same month a year ago, PCE price index slowed from 3.0% yoy to 2.6% yoy, below expectation of 2.9% yoy. Core CPI price index fell from 3.4% yoy to 3.2% yoy, below expectation of 3.4% yoy. Goods prices fell -0.3% mom while services prices rose 4.1% yoy. Foods prices rose 1.8% yoy and energy prices decreased -6.0% yoy.

US durable goods orders rises 5.4% in Nov, ex-transport up 0.5%

US durable goods orders rose 5.4% mom to USD 295.4B in November, above expectation of 2.7% mom. Ex-transport orders rose 0.5% mom to 187.6B, above expectation of 0.2% mom. Ex-defense orders rose 6.5% mom to USD 279.6B. Transportation equipment rose 15.3% mom to USD 107.8B.

Canada GDP unchanged for the third month in Oct

Canada’s GDP was essentially unchanged for a third consecutive month in October, below expectation of 0.2% mom growth. Services producing industrial edged by 0.1% mom while goods-producing industries were essentially unchanged. The 20 industrial sectors evenly split between increases and decreases.

Advance information indicates that GDP rose 0.1% mom in November.

UK retail sales volumes rises 1.3% mom in Nov, sales value up 1.0% mom

UK retail sales volumes (quantity bought) rose 1.3% mom in November, well above expectation of 0.4% mom. Ex-automotive fuel sales values rose 1.3% mom. Over the year, sales volumes rose 0.1% yoy while ex-fuel sales volume rose 0.3% yoy.

Sales value (amount spent) rose 1.0% mom, 3.8% yoy. Ex-fuel sales value rose 1.2% mom, 5.7% yoy.

Japan’s CPI core slows to 2.5% yoy, but services inflation hit three-decade high

Japan’s core CPI, which excludes fresh food, decreased from 2.9% yoy to 2.5% yoy in November, marking the lowest level since July 2022. Despite this deceleration, inflation remains above BoJ’s target of 2% for the twentieth consecutive month, indicating persistent inflationary pressures.

All-items CPI also experienced a slowdown, dropping from 3.3% yoy to 2.8% yoy. Additionally, core-core CPI, which excludes both fresh food and energy, showed a slight decrease from 4.0% yoy to 3.8% yoy.

Notably, goods inflation saw a significant reduction, declining from 4.4% yoy to 3.3% yoy. In contrast, service inflation showed an acceleration, rising from 2.1% yoy to 2.3% yoy. This increase in service inflation is the sharpest in three decades, dating back to October 1993, if the effects of past consumption tax hikes are excluded.

Energy prices, a key factor in inflation calculations, dropped by -10.1% yoy. Japanese government’s subsidies to reduce fuel costs played a role in tempering inflation rates. Without these subsidies, core CPI would have seen an increase of around 3%, according to the ministry.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8536; (P) 0.8587; (R1) 0.8614; More….

USD/CHF’s decline continues today and falls through 0.8551 support without noticeable recovery. Longer term down trend is resuming. Intraday bias remains on the downside for 100% projection of 0.9111 to 0.8665 from 0.8819 at 0.8373 next. On the upside, above 0.8572 minor resistance will turn bias neutral and bring consolidations first. But risk will stay on the downside as long as 0.8665 support turned resistance holds.

In the bigger picture, break of 0.8551 support indicates resumption of whole decline from 1.0146 (2022 high). Next target is 61.8% retracement of 1.0146 to 0.8551 from 0.9243 at 0.8257. Sustained break there could prompt downside acceleration to 100% projection at 0.7648. This will now remain the favored case as long as 0.8819 resistance holds.

Economic Indicators Update