- US PCE release lacks surprises
- Relief rally in equities ens week on positive note
By Daniela Sabin Hathorn, senior market analyst at Capital.com
The US PCE data has failed to provide a surprise. The data both for headline and core came in as expected, unchanged at 2.9% for core and a small uptick to 2.7% for headline. The knee jerk reaction in markets saw the US dollar and yields move higher, but the momentum quickly corrected to the downside. Meanwhile, US equities celebrated the release, pushing to session highs in the key major US indices. This is likely a relief reaction to the fact that the data did not come in hotter than expected, a concern that rose on Thursday after a stronger GDP revision and lower initial jobless claims.
The odds of rate cuts have remained mostly unchanged, with an 88% chance of another 25bps cut in October. The last few days have seen the probability drop from around 95%, but markets remain confident that further easing is coming. If the positive momentum remains in US equities throughout Friday’s session, it will be a welcome respite after three days of downside driven by cautious commentary from FOMC members and the stronger US data released on Thursday. The key hurdle next week will be the September jobs data, with key focus on the payrolls data and the average earnings. The current dovish expectations rely on a weakening jobs market, so any upside surprises could destabilise this rhetoric, potentially weighing on equities and gold.
S&P 500 daily chart
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