core PCE for 10/30

Not really...the market hasn't reacted that way although it may have put a brake on further EURO and GBP buying. The market reacts to the latest fundamentals as they are released. The core PCE has been analyized by BB as being dis-inflationary and the market has confirmed this so far. A rate increase from the Fed isn't on the horizon in the short term, while a B0E raise still is very much in play and in my opinion, that's what's driving this market.
I really think traders will be focusing on the UK home prices and all the indications are for further increases there while over here, economists are still debating whether a bottom in the housing market has been reached or will be in the near term.

There is a call for a BoE increase from many places; the NIESR and economists from the London School of Economics...former BoE members...the house prices tom would only further confirm that thinking (which is all but a cetainty anyway)...so in the near term a diverging interest rate picture is in play for GBP/USD.

Being new to news trading, I'm confused:

 

1. The Euro dropped 16 ticks on the futures, even though the news came in at consensus.
2. Why would it move on par with consensus?
3. Is maybe 16 ticks not much of a move?

Thanks in advance for the answers, guys.

Hi,


I wouldn't consider 16 ticks as a move.


Hey, your avatar icon is the best i saw on FF

according to traders on the floor, Last NFP, September was revised up from 128K to 188K (up 60k) and the net effect is like 120K added to the current month.....

SO! if there was a +0.1% upward revision to the last PCE, that should have the implied effect of a 0.2% added to the current PCE. Or simply put, it should be like comparing a 0.4% now vs 0.2% estimate.

Otherwise, all the crap bullishness (or bullshitness) last NFP is just a joke.


From my experience on "multiple number news", when the primary number (in this case CORE PCE) comes out at par with consensus, LOOK for other numbers for comparision.

Example:
* PCE CORE MOM: 0.2% V 0.2%E;
* PCE DEFLATOR YOY: 2.0% V 3.0%E;
* PERSONAL INCOME: 0.5% V 0.3%E;
* PERSONAL SPENDING 0.1% V 0.2%E;

From the above, you might say, PCE deflator is bad for USD. However you should consider that its a Y/Y number and therefore less of importance. What about the lower Personal Spending? It is only lower by 0.1% while Personal Income is 0.2% better. So the net effect is Dollar Positive. Thats my view of the numbers.

Oh yeah, we should also consider the POWER of revision.
- Prior PCE Core revised to 0.3% from 0.2% = USD Positive
- Prior personal income revised to 0.4% from 0.3% = USD Positive
- Prior personal spending revised to 0.2% from 0.1% = USD Positive



And from experience: Traders are looking for "confirmation" that will support/short USD. Currently, I'd say traders are looking for hope for USD. In the above, the results were not USD negative and therefore, should be viewed USD positive.


I am actually surprised that there was very limited USD bullishness that occured. I was expecting a huge turn around. But since it did not, USD bulls are gun shy. And in my interpretation, that means, we will expect further USD shorts!

I totally agree!

they were having too much inflation in UK, some were even lookin for a 50bps.. Just look at last month's MPC result; there was 1 voter added to the + rate hike = meaning, they are slowly convince of increasing inflation...

Ummm... when is the rate decision anyways? Nov 9?

From Thomson:

The implicit deflator on PCE fell by 0.6%, the biggest 1-month drop on records dating back to 1959. That took the year-ago increase down to just 1.7%, nearly half the 3.2% increase from August 2005 to August 2006. The core PCE deflator rose by 0.177% for the month and 2.149% for the last 12 months. That's not a big enough drop from August's 11.5-year high (2.481%) to make the Fed restful on the future path of inflation.

Not sure I agree with this last sentiment. I'm going off of the market's perception and since a big round of $ buying wasn't seen, especially since the 200+ pip GBP rise since last Wed, I have to asssume the market has spoken and it doesn't see anything to alter the view that a Fed raise is not in the cards this year or the next quarter. We still have friday's NFP, but with all the upward revissions, it's possible to see a lot of confusion there.

When I talk about a big round of $ buying, I don't mean some intermediary profit taking. My opinion is that a shift in the market's perception of future Fed moves would be reflected in a break below 8900.

Look at what happened with Lacker's statement today-very mild $ buying, but nothing to talk about. This is probably consistent with the market's opinion that the Fed will continue to talk causiously regarding inflation, but be content to sit on the sidelines for awhile, given the present fundamentals.

I would watch the ebb and flow of the GBP/USD like this:

Intermediate profit taking and levels to hold. I don't expect anything below 8950 given the present fundamentals. Buying opportunities will continue after profit taking as long as the present fundamentals hold. This kind of movement before tomorrows housing numbers confirms the market is expecting an inflationary reading.