The financial markets have been experiencing mixed actions, which has led investors to adopt a cautious stance on Friday. The upcoming economic data releases, particularly the Personal Consumption Expenditures (PCE) Price Index data and the revisions to the July Consumer Sentiment Index, are being closely monitored for insights into the state of the economy. The Federal Reserve’s preferred gauge of inflation will play a significant role in shaping market expectations.
US GDP Growth Exceeds Expectations
The United States’ Gross Domestic Product (GDP) expanded at an annual rate of 2.8% in the second quarter, surpassing market expectations of 2%. While this was a positive development, the details of the GDP report revealed that the Gross Domestic Product Price Index and the core Personal Consumption Expenditures Price Index did not meet market expectations. Nonetheless, the upbeat GDP data contributed to a flat close for the US Dollar (USD) Index on Thursday.
The US Dollar Index is currently in a consolidation phase below 104.50, while US stock index futures are trading marginally higher. The 10-year US Treasury bond yield remains above 4.2%, indicating a sideways trend. The performance of the US Dollar against major currencies is crucial to monitor, with the Japanese Yen emerging as the strongest against the USD this week.
Global Economic Indicators
The Tokyo Consumer Price Index data from Japan showed a slight decline in July, impacting the performance of the USD/JPY pair. Meanwhile, EUR/USD and GBP/USD are experiencing their own dynamics, with both pairs navigating various levels of support and resistance. Gold prices faced downward pressure due to concerns over the Chinese economic outlook but are now showing signs of a technical correction.
The Core Personal Consumption Expenditures (PCE) Price Index, released by the US Bureau of Economic Analysis, provides insights into inflation trends in the US. This data, which excludes volatile components like food and energy, is closely watched by the Federal Reserve. A high reading of the Core PCE Price Index is bullish for the US Dollar (USD), while a low reading is bearish.
The economic events unfolding on July 26 are shaping market sentiment and influencing the performance of major currencies and assets. Investors are advised to stay attentive to upcoming data releases and global economic indicators to make informed decisions in the financial markets.