Fed's Favorite Inflation Gauge Rises More Than Expected In April: Market Expectations Increase For June Interest Rate Hike
Portfolio Pulse from Piero Cingari
The Personal Consumption Expenditure (PCE) price index rose 4.4% YoY in April 2023, higher than expected, increasing market expectations for a June interest rate hike. The US dollar index (DXY) and the policy-sensitive two-year Treasury yield increased, while S&P 500 futures traded flat.
May 26, 2023 | 12:48 pm
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POSITIVE IMPACT
The US dollar index (DXY), tracked by Invesco DB USD Index Bullish Fund ETF (UUP), moved up by 0.25% following the higher-than-expected PCE price index data.
The higher-than-expected PCE price index data increases the likelihood of a June interest rate hike, which in turn strengthens the US dollar. As UUP tracks the US dollar index (DXY), it is expected to benefit from this news in the short term.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
Futures on the S&P 500 index, tracked by the SPDR S&P 500 ETF Trust (SPY), erased session gains and traded flat following the release of the higher-than-expected PCE price index data.
The higher-than-expected PCE price index data increases the likelihood of a June interest rate hike, which could lead to higher borrowing costs and potentially impact corporate earnings. This news has a neutral short-term impact on SPY as it erased session gains and traded flat.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80