- The Euro remains steady at mid-term highs as US inflation and spending data disappoint.
- US PCE inflation eases beyond expectations and cements hopes of Fed cuts in early 2025.
- Better-than-expected US Durable Goods Orders are keeping the Greenback from a deeper depreciation.
The Euro (EUR) is holding strong after initial volatility due to mixed US data. It remains steady at fresh four-month highs above 1.1010 at Friday’s United States (US) session opening, with the Dollar weighed by weak US Personal Consumption Expenditures (PCE) Prices Index and Personal Spending data.
The pair spiked lower immediately after the data release, as the better-than-expected US Durable Goods orders report provided an initial boost to the Dollar. However, the market acknowledged that these figures increase the odds for Federal Reserve (Fed) cuts in early 2024, causing the Dollar to lose momentum.
US Q3 GDP growth was revised to a slower pace than previously estimated, accompanied by weaker manufacturing data and signs of easing inflation, pointing towards a possible soft landing ahead.
Daily digest market movers:Â US PCE Inflation and Spending data adds pressure on the USDollar
- US PCE Prices Index contracted against expectations in November, with the year-on-year rate easing to 2.6%, below the 3.8% market consensus, from 3% in the previous month.
- The Core PCE increased 0.1%, steady from the previous month, and 3.2% on the year, following a 3.5% reading in October. The market had anticipated 0.2% and 3. 3% readings respectively
- US Personal Spending grew at a 0.2% pace from 0.1% in October, below the consensus 0.3% reading.
- On the positive side, US Durable Goods Orders beat expectations with a 5.4% increase in November, following a 5.1% decline in October.
- US Q3 GDP was revised to a 4.9% annualized growth from the previous 5.2% estimate.
- The Philadelphia Fed Manufacturing index dropped to -10.5 in December from -5.9 in November; the market expected a moderate improvement to -3.
- Investors are pricing a nearly 75% chance of a quarter-point rate cut in March and 150 bps cuts in 2024, according to the CME Group Fed Watch Tool.
Technical Analysis: Euro breaks 1.1010 resistance, eyes 1.1070
Euro bulls have gathered strength on Friday’s European session, to break above November and December’s peak, at 1.1010. The Dollar Index (DXY) dipped to fresh lows and after US Personal Spending and PCE Prices Index figures confirmed the disinflationary trend.
A confirmation above 1.1010 would shift bulls’ focus towards the early August high at 1.1070, and the July 24 and 27 peak, at 1.1150.
To the downside, support levels are 1.0930 ahead of a key support area above the 4-hour 100 Simple Moving Average (SMA) at 1.0870. Below here,
