USD: Fed on hold as core PCE surprises higher – Nordea

FXStreet Insights Team FXStreet

Jan von Gerich at Nordea notes that US data flow has been light, but a December upside surprise in core PCE suggests price pressures may be easing more slowly than CPI implies. He argues this supports the Federal Reserve staying on hold, and Nordea does not expect further rate cuts even after Kevin Warsh replaces Jerome Powell.

Sticky inflation backs steady Fed policy

"Late last week, there was an upside surprise in the Fed’s preferred inflation measure, the core PCE, and though the data were for the month of December compared to the latest CPI figure for January, price pressures may not be falling quite as rapidly as suggested by the CPI data, which will support the Fed on hold for now."

"The Fed took a more balanced stance towards the labour market risks already at the January meeting and can afford to retain a wait-and-see attitude for now."

"We do not expect any further cuts from the central bank, including when Kevin Warsh is set to take over from Jerome Powell."

"Risks remain tilted towards further rate cuts, though."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD clings to daily gains near 1.3350

GBP/USD holds just in positive territory around 1.3350 on Friday as the Greenback keeps a vacillating price action. With Fed rate hike expectations easing and US markets closed for the Independence Day holiday, Cable remains on track to post solid weekly gains.

EUR/USD consolidates below mid-1.1400s as Hormuz risks support safe-haven USD

The EUR/USD pair kicks off the new week on a subdued note and oscillates in a narrow band below mid-1.1400s during the Asian session. Spot prices, however, remain within striking distance of a nearly two-week high, touched last Thursday, amid mixed fundamental cues.

Gold eases from two-week top as Hormuz risks support USD; remains near $4,200

Gold struggles to capitalize on its strength beyond $4,200 and retreats slightly from a two-week high touched during the Asian session on Monday. The US Dollar edges lower amid persistent geopolitical uncertainties stemming from tensions in the Strait of Hormuz, acting as a headwind for the bullion. However, receding Fed-hike bets might hold back USD bulls from placing aggressive bets and help limit the downside for the non-yielding yellow metal.

Week ahead: ISM services PMI and Fed Minutes to shake Fed hike bets

Dollar drops on NFP, but rate hike still expected by year-end. ISM services PMI and Fed minutes are the greenback’s next catalysts. RBNZ expected to raise rates, focus will be on forward guidance. ECB minutes, China CPI and Canada’s jobs report also on the agenda.

Why central banks are loading up on Gold during the current 30% correction

Gold has crashed from $5,500 to $4,000 in five months, marking a decline of almost 30% that has triggered widespread retail panic. However, this correction could present a significant opportunity, driven by an unprecedented market indicator: central bankers and the world's largest asset managers are aggressively buying.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.