Inflationaty data from both EZ and US might refuel USD Sell-Off

Discussion in 'Data Sets and Feeds' started by pere, Nov 30, 2006.

  1. pere

    pere

    After a slightly overextended week of losses, the USD gained back some of its losses yesterday on the back of somewhat mixed data. While Q3 Gross Domestic Product surprised to the upside by 0.4% and came in at 2.2%, the PCE for the same period came in slightly lower than expected, at 2.4% vs. 2.5% expected. The PCE index, Personal Consumption Expenditure, is one of the Fed's most scrutinized inflationary gauges, and the figure coming in slightly lower suggests a step down of inflationary pressures, and lowers the probability of the continuation of the monetary tightening in the US. To add to this downside for the dollar, New Home Sales dropped to 1.004mln vs. expectation for a milder drop to 1.044mln. The state of the housing market is very significant for the US economy because a lot of consumers finance their consumption through second mortgages on their houses. The cool down in the housing sector mainly derives from the increasing interest rates on loans, and judging from the Beige Book that was released yesterday, is the number two concern of the Fed governors, only inflation being first to thy.

    Today we are expecting additional inflationary data to come in the figures of MoM PCE (f/c 0.1%) and Personal Income (f/c 0.5%). Additional weak figures might be harmful for the USD, refueling its sell-off. Along with this data we are expecting Weekly Jobless Claims which will most probably leave no impact given the far more important data releases today, and an hour and a half later the Chicago Purchasing Managers' Index is due and is expected at 54.8.

    Although the USD might continue to find support at current levels, given the current anti-dollar sentiment we believe the downside to be more likely.