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Traders Left Underwhelmed by Flat Inflation Data and Modest Income Growth

Traders Left Underwhelmed by Flat Inflation Data and Modest Income Growth

Dylan Jusino, Contributor


Talking Points:

- All Personal Consumption Expenditure (PCE) Indices came in line with expectations; notably, Core PCE rose by 1.5% YoY in January

- Personal income was the only surprise in the data, albeit 0.4% versus the 0.3% expectation did not drum up a dollar rally

- See the DailyFX Economic Calendar for upcoming economic data and for a schedule of live coverage see the DailyFX Webinar Calendar.

See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

US Inflation Data

February was quite a turbulent month in the FX market. As we enter the final month of the first quarter in 2018 the inflation data out of the US failed to garner much attention from traders. Every print matched their expectations as well as the previous figure which included headline PCE and Core. Core PCE came in at 1.5% year-over-year while the headline print came in at 1.7%. While PCE is the Federal Reserve’s preferred measure of inflation it is unlikely that FOMC members will be giving today’s print much consideration.

The only surprise markets received came from personal income which rose by a modest 0.4% versus 0.3% estimated. Although, real personal spending fell by -0.1%, as expected, and the previous figure was revised down from 0.3% to 0.2%. For a full report of January personal income and outlays see the BEA publication.

US Jobs Data

Perhaps the highlight of the morning prints came from the Department of Labor’s (DOL) jobless claims report. In January, DOL reported that in the week ending February 24 the initial claims advance figure came in at 210k. This marks a decrease of 10k jobless claims from the weak prior. Although, much like the PCE data, markets largely overlooked this print as ADP Employment Change and Nonfarm Payrolls will be released next week.

Perhaps markets are looking ahead to Fed Chairman Powell’s testimony in front of the House Financial Services Committee later today.

Below is a list of economic releases that has had a limited impact on the US Dollar:

- USD Personal Income (SEP): +0.4% versus +0.3% expected, from 0.4% previous

- USD Personal Spending (SEP): +2.0% as expected, from +0.4% previous

- USD Real Personal Spending (SEP): -0.1% as expected, from +0.2% (revised lower from 0.3% previous)

- USD PCE Core (YoY) (SEP): +1.5% as expected, same as previous

Chart 1: DXY Index 15-minute Chart (February 26 - March 1, 2018)

DXY has held steadily above 90.00 since breaking that resistance level earlier this week. But today’s inflation and job data failed to push the dollar higher. DXY traded at 90.77 at the time that this was written.

--- Written by Dylan Jusino, DailyFX Research

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