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Personal Consumption Expenditures Fall in December; USD/JPY Bearish

Personal Consumption Expenditures Fall in December; USD/JPY Bearish

Trang Nguyen,

THE TAKEAWAY: U.S. Personal Consumption Expenditure Falls> Modest Job Growth and Wage Increase Restrained Consumer Spending > USD/JPY Bearish

U.S. real personal consumption expenditures (PCE), a primary measure of consumer spending on goods and services, declined $2.0 billion, or 0.1 percent in the last month of 2011, in contrast to an increase of $11.4 billion in November, the Commerce Department reported today. Regardless, the PCE core, which excludes the more volatile components of food and energy, advanced 0.2 percent, topping consensus forecast of 0.1 percent increase. From a year prior, the PCE core climbed 1.8 percent in December in line with expectations. Meanwhile, personal income grew $61.3 billion, or 0.5 percent, in December, following a 0.1 percent pickup in November.

U.S. Consumer Price Index (YoY): June 2010 to Present

013012_US_Personal_Consumption_Expenditure_December_body_Chart_1.png, Personal Consumption Expenditures Fall in December; USD/JPY Bearish

Prepared by Trang Nguyen

U.S. personal consumption expenditures account for about two-thirds of domestic final spending, thus primarily driving future economic growth. PCE increased 4.7 percent in 2011 compared with an increase of 3.8 percent in 2010, pointing to a more resilient recovery in the world’s largest economy. However, modest job growth and slow wage increase still restrain consumers from extending their spending.

USD/JPY 1-minute Chart: January 30, 2012

013012_US_Personal_Consumption_Expenditure_December_body_Picture_1.png, Personal Consumption Expenditures Fall in December; USD/JPY Bearish

Charts created using Strategy Trader– Prepared by Trang Nguyen

The U.S. dollar strengthens against most of it major peers except its Japanese trading partners ahead of the North American trading session today as investor scaled back their appetite for risk before EU’s leader summit. The dollar appreciated more than 0.9 percent versus high-yielding currencies but depreciated about 0.3 percent versus the yen. As can be seen from the 1-minute USD/JPY chart above, the reserve currency rapidly dropped about 14 pips versus the Japanese Yen following the personal income and spending report. The Relative Strength Indicator falling below 30 twice indicated that market participants preferred purchasing the yen to the dollar. At the time this report was written, the dollar traded at 76.56 Japanese yen.

--- Written by Trang Nguyen, DailyFX Research Team for

To contact Trang, email

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.