Abstract: The annual rate of PCE inflation, which is favored by the Fed, was recorded at 6.8%, a new high for the year; after the data was released, the USD/JPY rebounded to test 134.
The U.S. Personal Consumption Expenditure (PCE) price index rose 6.8% year-on-year in June, a new high for the year (6.6% in March), and a month-on-month increase of 1%, slightly higher than the forecast of 0.6%.
The core PCE price index excluding food and energy rose 4.8% year-on-year, up from 4.7% in May, and up 0.6% month-on-month, up from 0.3% in May.
At the same time, Canada announced the initial monthly GDP growth rate of 0.1% in June. After the data was released, the USD/CAD fluctuated little in the short term.
Chart provided by DailyFX
Note that personal consumption expenditures are the largest component of U.S. GDP, and the PCE price index, a price index constructed from a range of goods and services in this part, is a favored inflation indicator by the Federal Reserve. Federal Reserve Chairman Jerome Powell said at a monetary policy news conference on Thursday that inflation risks will continue to be highly valued and the pace of future rate hikes will depend on data. PCE inflation rebounded to a new high this year, which may increase the Fed’s hawkish expectations to a certain extent, but now the focus of the market is on recession fears and its impact on the economy and financial markets.
The negative GDP growth in the second quarter of the United States officially entered the United States into a “technical recession. It is worth noting that the annualized quarterly rate of GDP of -0.9% has only entered the negative territory slightly. In view of this, Fed official Bostic said that he does not think The U.S. is in recession. But the market’s fears of a recession haven’t dissipated. Bostic said widespread fears of a recession could lead to a recession.
After the release of the data, the yield on the 2-year U.S. Treasury bond rose and fell, inverting 21 basis points from the 10-year bond. USD/JPY tested 134, rebounding more than 1% from the intraday low. Notably, the rate has broken below the March support line and the July high could be a top.
USD/JPY 30 minute chart
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