US Dollar: PCE slowdown and hawkish Fedspeak – TD Securities

TD Securities economists expect April core and headline Personal Consumption Expenditures (PCE) Price Index to moderate to 0.26% and 0.43% month-on-month, translating to 3.3% and 3.8% year-on-year. They also see softer nominal and real personal spending. Upcoming Federal Reserve communication is likely to feature hawks arguing for reduced easing bias, while doves stress patience without signalling rate hikes as the next step.

Cooling PCE but cautious Fed tone

"We expect core and headline PCE prices moderated in April to 0.26% and 0.43% m/m, respectively."

"Tariff passthrough was moderate in the month, and a slowdown in supercore services offset strength in shelter."

"Our forecast translates to 3.3% and 3.8% y/y for core and headline, respectively. We also look for nominal and real personal spending to slow down in the month."

"Scheduled Fedspeak next week includes a mix of hawks and doves. We expect hawks to continue communicating preference for a drop in the FOMC's easing bias along with concerns around the inflation outlook."

"Doves will still communicate patience due to inflation risks, but will likely stop short of communicating that a hike could be the Fed's next move."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)