PCE inflation preview: will we get any closer to 2%?

Key points

• The April PCE price index report will release Friday, May 31st at 8:30am EST
• Core PCE inflation YoY is expected to remain stable at 2.8%
• The US dollar stands to strengthen from persistent inflation, as the chances of a summer rate cut continue to dwindle

When does the April PCE report come out?

The April Personal Consumption Expenditures (PCE) report, a vital inflation measure, is scheduled for release on Friday at 8:30am EST. This report provides insights into inflation trends by detailing month-over-month and year-over-year rates. Although the Consumer Price Index (CPI) is more popular among the general public, the Federal Reserve favors PCE metrics for guiding monetary policy decisions. Analysts and traders rely heavily on this data to forecast interest rate moves, making it a focal point in financial market projections.

What to expect from April's PCE data

The upcoming release of the April PCE data is anticipated to mirror March's figures, with headline year-over-year inflation expected at 2.7% and core inflation at 2.8%. These consistent inflation rates would suggest stalling progress in what has otherwise been a successful stairstep lower towards the Fed's 2% goal. A reading lower than expected could inspire confidence that monetary policy could loosen in the near future, while an uptick may cause fear of an additional rate hike from the Fed to curb persistent inflation.

What does sticky inflation mean for US dollar?

If inflation remains consistent, referred to as 'sticky' inflation, the Federal Reserve might opt to hold interest rates steady for longer to manage economic growth and curb inflationary pressures. This decision typically results in higher yields on US dollar-denominated assets, making the dollar more attractive to investors seeking returns in a stable currency. This effect could be especially pronounced against European currencies like EUR and GBP as their central banks look towards possible summer interest rate cuts. Conversely, if inflation lowers unexpectedly, we could see rate cuts sooner and the dollar could weaken against major currencies. Regardless, this data release will set the stage for the June FOMC meeting where Fed members will reveal their updated plan of action to maintain sustainable growth in the US.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.