Attention on the U.S. Core PCE Deflator

Attention on the U.S. Core PCE Deflator

22.12.2021

Yesterday, the three major U.S. stock indices all rebounded, creating a risk-on sentiment characterized by rising stock prices, interest rates, and oil prices. However, some view this as a “dead cat bounce”—a rebound following a sharp decline—so it remains to be seen whether the stock rally will continue. The VIX (fear index) has fallen by about 8% to 21.0.

In the foreign exchange market, the U.S. dollar rose slightly, and the EUR/USD pair fell from 1.130 to 1.126.During today’s Asian session, the EUR/USD pair has been testing lower levels, and since it is currently trading below the 20-period moving average on the 4-hour chart, caution is warranted regarding further declines. The U.S. dollar is also showing strength against the yen, with USD/JPY trading around 114.12. Furthermore, given the recent correlation between the U.S. dollar and the stock market, it is important to monitor stock price movements as well.

Today, during European trading hours, the UK Q3 GDP (final reading) and UK Q3 current account balance will be released at 16:00, followed by the French Producer Price Index at 16:45. During U.S. trading hours, the U.S. MBA Mortgage Applications Index will be released at 21:00, followed by the U.S. Q3 GDP (final reading) at 22:30,U.S. personal consumption, U.S. core PCE deflator, and U.S. Chicago Fed National Activity Index; at 24:00, U.S. existing home sales and U.S. consumer confidence; and at 24:30, U.S. weekly crude oil inventories. We will monitor these economic releases closely to gauge the direction of the U.S. dollar.