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Investors Wait for US Core PCE Release to Confirm Fall in Inflation

Miguel A. Rodriguez
Miguel A. Rodriguez
27 November 2023

This trading week will focus on inflation data and oil. Investors will be keen to see the outcome of the US Core Personal Consumption Expenditures Price Index (PCE) and the OPEC+ meeting on Thursday. Continue reading to find out more. 

The Major Indices Closed Higher for The Fourth Month in a Row

Friday was a day with limited price action due to the Thanksgiving holiday on Thursday.

In the US stock market, the Dow Jones closed slightly higher, the S&P was almost unchanged, and the Nasdaq fell marginally.

During the trading week, the major indices closed higher for the fourth consecutive week of gains as shown below:

  • Dow Jones 30 rose 1.27%.
  • The S&P rose 1.0% this week.
  • Nasdaq rose 0.89% this week.

The 10-Year Yield Rose 5.4 bps on Friday  

In the bond market there was a spike in yields on Friday. The 10-year yield rose 5.4 bps. Although this is a significant movement, it has no fundamental ground. It is probably a technical adjustment that was amplified by the lack of liquidity in the market.

In fact, this rise in yields did not have an impact on the price of the Dollar, which is usually the case. In principle it should have strengthened the Dollar, but the currency weakened in a continuation of the trend that begun weeks ago

The EUR/USD Advanced and Reached the Highs of November 21

The EUR/USD pair traded close to 1.0950, approaching the highs of 1.0965 on November 21. If the pair goes above this relevant technical level, it will pave the way for further advances, from a technical analysis perspective.

EUR USD graph Nov 27 2023.png

EUR/USD daily chart over six months, November 27, 2023. Source: CAPEX.com WebTrader.  

US PCE Release Expected to Confirm Fall in Inflation

Over this trading week the important data that is expected to be published is the PCE and the US core PCE.

Core PCE, which excludes volatile food and energy prices, is expected to rise 0.2% MoM. This would be slightly less than the 0.3% pace seen in September. This data is crucial to confirm the moderation trend in inflation, as indicated in the October Consumer Price Index (CPI) report. These trends in inflation have caused analysts to rule out rate hikes in December.

Markets believe that further falls in inflation may spark discussions about possible interest rate cuts in 2024. Currently, the market has already priced in a rate cut for June. Therefore, confirmation of the downward trend in inflation in this Thursday's PCE data would positively influence the stock markets. It would also put downward pressure on the Dollar as investors would anticipate interest rate cuts by the Federal Reserve.

OPEC+ Meeting Could Indicate More Production Cuts

Another anticipated event this week is that of the OPEC+ meeting which is scheduled for November 30. This meeting was originally scheduled for November 26 and was rescheduled to its new date due to debates about production cuts among the organisation’s members. The meeting is not expected to bring about policy changes. More focus is put on the possibility of Saudi Arabia and Russia extending or deepening their voluntary production cuts. Possible scenarios for the meeting include an extension of current cuts, deeper production cuts, or maintaining the status quo.

The market has been waiting for announcements of greater production cuts that, if they occur, would drive up the price of crude oil, but the different scenarios are still open.

Key Takeaways

  • Major indices closed higher for the fourth consecutive week on Friday.
  • The 10-year yield rose 5.4 bps at the end of the trading week.
  • The EUR/USD pair traded close to 1.0950 and approached the highs of November 21 at 1.0965.
  • The US PCE will be released on Thursday and is expected to confirm a drop in inflation.
  • The Fed is expected to leave rates unchanged in December.
  • Investors will look to the OPEC+ meeting on Thursday to see if there will be more production cuts.
  • Markets will wait to see if OPEC+ announcements will influence the price of oil.

Related Articles:

Sources: Bloomberg, Reuters 

 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.