Summary:

• US core PCE index M/M: 0.2% vs 0.1% exp  
• Initial jobless claims falls to 221k 
• USD moving lower despite the data

Inflation has been an important theme today, with the Euro area CPI flash estimate beating forecasts and we’ve just had some more higher than expected figures from the US. In M/M terms the PCE core index for April came in at 0.2% – inline with the prior reading and above the 0.1% expected. This is a small positive beat and sees the core Y/Y reading remaining at 1.8% as was expected. 

 

 Personal income for the US came in at 0.3% as expected, representing an increase after the prior reading was revised down to 0.2%. Source: Bloomberg

At the same time as the PCE release, there were several other US data points announced with the initial jobless claims falling to 221k from 234k last time out comapred to an expected 228k. This reading marks the end to two successive misses and is pleasing just 24 hours before the latest NFP report. There was also the release of the latest personal income figures (+0.3% vs +0.3% exp) and the personal spending number (+0.6% vs +0.4%). 

 The USD looks set for another day of declines with the buck losing ground against nearly all of its peers with only emerging markets faring notably worse. Source: xStation

While there is still some way to go as far as the trading week is concerned, and with NFP tomorrow the market could yet change tack, at present it’s not looking too good for USD bulls. The greenback has been on a strong march higher in recent weeks but an inverted hammer may be forming on W1 in the vicinity of a previous swing high around 95.10. This region provided resistance to the attempted rally back in November and given that it also broadly coincides with previous supports it could be seen to be a key swing level. A failure to breach 95.10 would place a ceiling on the market and could lead to some of the recent gains being handed back.  

 The USDIDX could be reversing at a prior resistance level just above the 95 handle with a weekly candlestick showing an inverted hammer at present.