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Positive data for the US dollar

US data was expected to be the key point of today’s session. PCE deflator and consumer spending were to show if the FED could raise rates in June. Indeed, the figures showed that the central bank is likely to hike next month as they bode well for the economic growth.

The consumer is on track for a second- quarter comeback after a weak stretch at the start of the year, as Americans kept up spending in line with income gains in April, Commerce Department figures showed Tuesday. The pickup in nominal consumer purchases shows Americans appear more eager to spend in the second quarter following the weakest gains since 2009 in the January-March period.

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US data was slightly better than expected, which should open the way towards the rate hike in June. source: Bloomberg

Household balance sheets that have been strengthening with a tightening labor market and rising wages should help buoy spending as the broader economy gains momentum. Wages and salaries rose 0.7 percent from the previous month, matching the fastest gain this year.

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US PCE inflation slowed on the YoY basis, but the monthly data showed a nice surprise. That is a good sign for the USD. source: XTB, Macrobond

While Federal Reserve policy makers should take some comfort that the results were in line with forecasts and core prices exceeded estimates, their preferred inflation gauge did slow down on a year-over-year basis, slipping slightly further away from the 2 percent annual target. 

To conclude, today’s prints should confirm that the economy is sound and that rates could go higher soon. It also showed, however, that the inflation is still below the FOMC’s target, which limits a potential hawkishness of the FOMC.

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 USDJPY  gained on better data. A rebound above 111.30 could open a way towards 112.00. source: xStation5


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