The financial markets saw mixed action on Thursday, leading investors to adopt a cautious stance on Friday. The upcoming US economic reports will include the Personal Consumption Expenditures (PCE) Price Index data for June. This data is crucial as it is the Federal Reserve’s preferred gauge of inflation. Additionally, reports on Personal Income and Personal Spending figures are also highly anticipated. The University of Michigan will release revisions to the July Consumer Sentiment Index data, adding to the day’s economic data releases.
The United States’ Gross Domestic Product (GDP) expanded at an annual rate of 2.8% in the second quarter, exceeding market expectations of 2%. This growth followed a 1.4% increase in the first quarter. The GDP report also revealed that the Gross Domestic Product Price Index rose 2.3% in the second quarter, falling below market expectations of 2.6%. Meanwhile, the core Personal Consumption Expenditures Price Index rose by 2.9% on a quarterly basis, surpassing analysts’ estimate of 2.7%.
After a slight decline in the morning, the US Dollar (USD) Index gained strength and closed flat on Thursday, buoyed by the positive GDP data. Early Friday, the USD Index remained in a consolidation phase below 104.50. US stock index futures were trading slightly higher, and the 10-year US Treasury bond yield continued its sideways movement above 4.2%.
The US Dollar showed weakness against the Japanese Yen, according to recent data. The USD/JPY pair experienced a rebound following a touch of its weakest level since early May, staying in a consolidation phase below 154.00 on Friday. In the case of EUR/USD, the pair remained relatively stable around 1.0850, while GBP/USD struggled to overcome bearish pressure, hitting a two-week low at 1.2850.
Gold prices fell by more than 1% on Thursday due to concerns about China’s economic outlook. XAU/USD experienced a technical correction on Friday, trading slightly higher at around $2,370.
The Core Personal Consumption Expenditures (PCE) Price Index, released monthly by the US Bureau of Economic Analysis, monitors changes in the prices of goods and services purchased by consumers in the US. It is the Federal Reserve’s preferred measure of inflation. The year-over-year (YoY) reading compares prices in the reference month to the same month a year earlier. The core reading excludes volatile food and energy components to offer a more accurate assessment of price pressures. A high reading generally favors the US Dollar (USD), while a low reading has a bearish impact.
Investors are cautiously awaiting the release of key economic data on July 26, including the PCE Price Index, Personal Income, and Personal Spending figures. The US GDP growth rate exceeded expectations in the second quarter, influencing market movements. Currency pairs like USD/JPY, EUR/USD, and GBP/USD showed varying levels of stability and volatility. Gold prices reacted to concerns about China’s economic outlook, while the Core PCE Price Index remains a vital indicator for inflation monitoring.
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