The Greenback Holds Steady, US PCE Inflation Report in Focus

Market Reviews

The US dollar continues to rise against the major currencies and trades near a nine-month high against the Japanese yen, after the data strengthened optimistic views on the US economy and supported the Federal Reserve signal to accelerate the rate of policy tightening for the next year. For now, the dollar and British pound are the strongest ones. Swiss franc remains the weakest one for the week. Today’s release of the US PCE inflation data could give additional boost to the dollar.

The global shares were mostly higher. DOW gained 0.21%, S&P 500 grew by 0.28% and NASDAQ added 0.65%. In Asia, Nikkei gained 1.25%, Hong Kong HSI increased by 1.73%, China Shanghai SSE rose by 0.93 and back above 2800, Singapore Strait Times rose by 1.17%.

The British Chambers of Commerce (BCC) predicts, that investment and recruitment would be cut in the event of ‘no deal’ Brexit. The BCC survey also showed, that 21% of businesses will cut investment, 20% will move part of all of their business to EU, 18% will cut recruitment. Also, 62% of businesses still haven’t completed a Brexit risk assessment.

After the highly anticipated cabinet meeting, Italian government decided to target budget deficit at 2.4% of GDP for the next three years. Economy Minister Giovanni Tria conceded his push for lowering deficit to just 1.6% of GDP, and then 2.0% in 2019. While the 2.4% deficit target remains below EU rule of 3.0%, EU might find a lack of commitment on Italy’s side to cut its massive debt.

Today’s economic data from Japan showed, that Tokyo CPI core accelerated to 1.0% yoy in September versus expectation of 0.9% yoy. Unemployment rate fell to 2.4% in August versus expectation of 2.5%. Retail sales rose more than expected by 2.7% yoy. However, industrial production rose by only 0.7% mom, missing the forecast.

Today, the US will release monthly Income and Spending data, including PCE inflation. Market's forecasts for August seen little changes from July readings, as core monthly PCE is forecast to increase 0.1% versus the previous 0.2%, while the core annual reading is expected to come at 2.0%, matching July's figure.