Positive Data Last Week, but USD Not Running Away With It Yet
The USD surged higher on Thursday due to stronger GDP, lower jobless claims and higher retail sales, but it retraced some gains on Friday
The FED has been slowing down with rate hikes recently, as inflation slows down and the US economy has been showing signs of weakness. Although in recent weeks we have seen some decent data coming in, which has improved the sentiment for the USD, although traders still look very cautious. The FED left the September rate hike scenario open, saying that they will follow the data and right the next day we saw some positive numbers coming in. The Q2 GDP came in at 2.4% against 1.8% expected at Q1 GDP was revised higher to 2.0%.
Retail sales for June jumped higher while unemployment claims declined again, showing that the employment sector is tightening further. That sent the UD surging higher on Thursday, although traders stopped and we saw a retracement of that move as the data yesterday showed some mixed results.
Employment costs for Q2 slowed more than expected, while the core PCE price index and personal income also slowed. So, the surge in the USD on Thursday ended pretty fast, although let’s see if the data in the coming week will show more economic improvement, in which case the USD will likely resume the upside momentum.
US Employment Costs Index for Q2 of 2023
- Employment costs index for Q2 1.0% versus 1.1% expected
- Employment costs index for Q1 was 1.2%
- Employment costs 1.0% versus 1.1% expected
- Benefits 0.9% vs 1.2% last quarter
- Wages +1.0% versus 1.2% last month
Looking at the chart, the employment costs remain in the upper end of the recent history going back to 2019, but that is near the low of the upper extreme.
US June 2023 Personal Consumption Expenditure Report
- June core PCE inflation YoY +4.1% vs +4.2% expected
- May core PCE inflation YoY was +4.6%
- PCE core 0.2% MoM vs +0.2% expected
- Prior PCE core MoM was +0.3%
- Headline inflation PCE YoY +3.0% vs +3.0% expected (prior was +3.8%)
- Deflator +0.2%MoM vs +0.2% expected (prior was +0.1%)
Consumer spending and income for June:
- Personal income +0.3% vs +0.5% expected. Prior month +0.4% (revised to +0.5%)
- Personal spending +0.5% vs +0.4% expected. Prior month +0.1%
- Real personal spending +0.4% vs 0.0% prior (revised to +0.1%)
This is a good report in general, although with YoY core inflation ticking down and slightly below the consensus. Headline PCE is also down to 3.0% and that shouldn’t trouble the market. The market reaction was minimal.
EUR/USD Live Chart
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