Fed's Preferred Inflation Measure Slows In May, But Traders Believe July Rate Hike Is A Done Deal
Portfolio Pulse from Piero Cingari
The Core Personal Consumption Expenditure (PCE) price index, the Federal Reserve's preferred measure of inflation, rose 4.6% YoY in May 2023, slightly down from the expected 4.7%. This led to a decrease in market expectations for a more aggressive Fed rate hike path. The U.S. dollar index (DXY), tracked by Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), dipped 0.3%. Futures on the S&P 500 Index, tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), surged 0.6%.
June 30, 2023 | 12:55 pm
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NEGATIVE IMPACT
The U.S. dollar index (DXY), tracked by Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), dipped 0.3% following the release of the PCE data.
The lower than expected PCE data led to a decrease in market expectations for a more aggressive Fed rate hike path, which in turn led to a decrease in the value of the U.S. dollar index (DXY). As UUP tracks the DXY, it is likely to be negatively impacted in the short term.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Futures on the S&P 500 Index, tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), surged 0.6% following the release of the PCE data.
The lower than expected PCE data led to a decrease in market expectations for a more aggressive Fed rate hike path, which is generally positive for equities as it means lower borrowing costs. As SPY tracks the S&P 500 Index, it is likely to be positively impacted in the short term.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80