22 Jun 2015
The week ahead in the US - RBS
FXStreet (Bali) - Brian Daingerfield, FX Trading Strategist at RBS, shares his insights on the latest FOMC stance and what it means for the rates outlook, while also looking at the key data out of the US, the PCE report being the most critical.
Key Quotes
"In her post-FOMC decision press conference this week, Chair Yellen said “While the Committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained.”
"We don’t think that economic indicators necessarily have to accelerate meaningfully from the more buoyant readings seen in the past month to achieve “more decisive evidence”, but the onus likely remains on the data not just to be solid, but to be consistent – even if data remains solid on a trend basis, choppiness in employment or retail activity may detract from the sense of reasonable confidence that inflation will pick up over time. This is likely especially true as long as the core PCE deflator is not currently in an upward trend."
"The key data release in the US this week is the PCE report for May, including the all-important PCE deflator. The jump in income amid disappointing spending has resulted in a pickup in the savings rate, which at 5.6% in April is near its highest levels since 2012. We think this will support spending going forward, an expectation that Chair Yellen shares – at her press conference this week, she said the underlying fundamentals for household spending “appear favourable.” Along with the PCE report, the PCE deflator is released, which is the Fed’s preferred inflation measure. The core PCE deflator slipped in April to 1.2% y/y, its lowest level since February 2014.
"First quarter GDP will be revised as well and the contraction in the first quarter may be revised favourably. Even so, Fed Chair Yellen seemed to hint in her press conference that the Fed’s 2015 GDP forecasts were completed under the assumption that “real…GDP looks to have changed little in the first quarter."
Key Quotes
"In her post-FOMC decision press conference this week, Chair Yellen said “While the Committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained.”
"We don’t think that economic indicators necessarily have to accelerate meaningfully from the more buoyant readings seen in the past month to achieve “more decisive evidence”, but the onus likely remains on the data not just to be solid, but to be consistent – even if data remains solid on a trend basis, choppiness in employment or retail activity may detract from the sense of reasonable confidence that inflation will pick up over time. This is likely especially true as long as the core PCE deflator is not currently in an upward trend."
"The key data release in the US this week is the PCE report for May, including the all-important PCE deflator. The jump in income amid disappointing spending has resulted in a pickup in the savings rate, which at 5.6% in April is near its highest levels since 2012. We think this will support spending going forward, an expectation that Chair Yellen shares – at her press conference this week, she said the underlying fundamentals for household spending “appear favourable.” Along with the PCE report, the PCE deflator is released, which is the Fed’s preferred inflation measure. The core PCE deflator slipped in April to 1.2% y/y, its lowest level since February 2014.
"First quarter GDP will be revised as well and the contraction in the first quarter may be revised favourably. Even so, Fed Chair Yellen seemed to hint in her press conference that the Fed’s 2015 GDP forecasts were completed under the assumption that “real…GDP looks to have changed little in the first quarter."