US Dollar Shows No Reaction on PCE Data

Market Reviews

The British pound weakened against the US dollar, with the GBP/USD pair slumping to two-week lows after a weak report on UK GDP for the second quarter. UK Q2 GDP was finalized at 0.4% qoq, unrevised. Growth were driven by services sector, which increased by 0.6%, partly on retail sales. Household spending grew 0.4% but business investment dropped notably by -0.7%. UK current account deficit widened to GBP -20.3B in Q2.

US dollar is trading mixed versus major currencies, as post FOMC rally lost momentum and PCE data provided no support. US personal income rose 0.3% in August, below expectation of 0.4%. Spending rose 0.3%, below expectation of 0.4%. Headline PCE slowed to 2.2% yoy, down from 2.3% yoy and missed expectation of 2.3% yoy. Core PCE was unchanged at 2.0% yoy, matched expectations.

Euro is trading as the weakest one, pressured by the news from Italy. The Italian government set the target for the budget deficit next year at 2.4%, ignoring the requirements of the EU. European Commission said today that it would assess the draft budget plan of Italy before end of November. 5-Star Movement leader Luigi Di Maio, also Deputy Prime Minister of Italy, said he was not worried by market reaction and will meet investors soon.

Today’s data also showed, that Eurozone headline CPI rose to 2.1% yoy in September, up from 2.0% yoy and matched expectation. However, Core CPI slowed to 0.9% yoy, down from 1.0% yoy and missed expectation of 1.1% yoy. Energy inflation remained strong, at 9.5% yoy, followed by food, alcohol & tobacco at 2.7%. The reading is likely unwelcome by ECB.

Germany unemployment rose 23k in September, unemployment rate fell by 0.1% to 5.2%. Swiss KOF Economic Barometer rose notably to 102.2 in September, up 3.3 pts from 98.9 and beat forecast of 100.1.