tl;dr
The U.S. PCE inflation data showed a 0.3% increase in April, aligning with market expectations, with a year-over-year PCE inflation rate of 2.7%. Core PCE inflation, excluding food and energy prices, cooled to 0.2% from the previous month's 0.3%, with an annual rate in line with forecasts at 2.8%. T...
US PCE Inflation Data Shows 2.7% Increase, Dampening Investor Sentiment The U.S. PCE inflation data showed a 0.3% increase in April, aligning with market expectations, with a year-over-year PCE inflation rate of 2.7%. Core PCE inflation, excluding food and energy prices, cooled to 0.2% from the previous month's 0.3%, with an annual rate in line with forecasts at 2.8%. The higher-than-anticipated inflation has dampened investor sentiment, leading to concerns over potential rate cuts by the U.S. Federal Reserve.
Following the PCE inflation release, the Bitcoin price initially rose by 0.95% to $68,773, but later declined to $66.8K due to risk factors. The U.S. 10-year Bond Yield decreased to 4.515%, and the U.S. Dollar Index Futures fell to $104.380. The latest PCE data has raised concerns about a dovish stance by the Federal Reserve, with a 99% probability that it will not change its policy rates at the upcoming June meeting. However, there is potential for rate cuts later this year.
Matrixport co-founder Daniel Yan emphasized the importance of the PCE data, stating that specific percentage increases would have bullish, bearish, or neutral effects on the market. Investors were eagerly waiting for the U.S. PCE inflation data after the U.S. GDP data showed that the economy had advanced better than the market expectations in the first quarter. Notably, the Personal Consumption Expenditure (PCE) and the Core PCE inflation data are key gauges to track the current inflation level. Besides, these are also key tools that the U.S. Federal Reserve considers while planning their interest rate plans.
US HEADLINE PCE INFLATION CAME IN AT 2.7%
The recent data by the U.S. Bureau of Economic Analysis showed that the U.S. PCE inflation increased 0.3% in April, in line with the market expectations. On a year-over-year basis, the PCE inflation came in line with market expectation at 2.7%.
Simultaneously, the Core PCE inflation, excluding food and energy prices, cools to 0.2%, as compared to 0.3% in the prior month. Meanwhile, the annual core PCE inflation also came in line with market forecasts at 2.8%. Although the Core PCE cooled last month, the inflation level still remains higher than anticipated, dampening the investors’ sentiment.
In addition, the inflation remaining above the central bank’s expectation of a 2% target range has dampened the investors’ sentiment so far. Having said that, the traders are seeking clarity over potential rate cuts by the U.S. Federal Reserve, as the higher policy rates have dampened the risk-bet appetite of the market participants.
The Bitcoin price noted a slight recovery, despite the latest inflation data. Meanwhile, following the PCE inflation release, Bitcoin price soared 0.95% to $68,773, while its trading volume remained muted at $27 billion over the last 24 hours. However, BTC price pared gains later due to a weak chart pattern amid Mt. Gox payout and DMM Bitcoin hack risks, with price falling to a low of $66.8K. Meanwhile, the U.S. 10-year Bond Yield slipped 0.73% to 4.515, while the U.S. Dollar Index Futures fell 0.27% to $104.380.
Notably, the latest PCE data has further fueled concerns over a dovish stance by the U.S. Federal Reserve. According to the CME FedWatch Tool, there is a 99% probability that the Federal Reserve will not make any changes to its policy rates at its upcoming June meeting. However, a new all-time high could coincide with rate cuts later this year.
Meanwhile, Matrixport co-founder Daniel Yan recently highlighted the significance of the Personal Consumption Expenditures (PCE) data for April. In a social media post, Yan stated that a 0.2% month-on-month increase for both Core PCE and PCE would be bullish for the market, while a 0.3% increase would be bearish. If one measure is at 0.2% and the other at 0.3%, Yan indicated a neutral outlook.