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May 29, 2019
The increase in Consumer Spending data and the decline in the Core PCE Index did not significantly affect the US Dollar. Markets tend to be wary of higher-impact events this week. The US Consumer Spending during March 2019 showed the highest increase in nine and a half years. However, other US economic indicators which were also released simultaneously tonight did not show the same optimism.
Personal Spending, also known as Consumer Spending in the United States, rose 0.9 percent in March 2019. This level was higher than the February level of 0.1 percent, and outperformed expectations of a rise to 0.7 percent. If viewed from the history of data over the past 10 years, this increase in March 2019 is the highest since August 2009.
On the other hand, the month-over-month Personal Consumption Expenditure (PCE) Price Index in March 2019 rose 0.2 percent, following a 0.1 percent increase in the previous month. However, the Core Personal Consumption Expenditure (PCE) of the US Price Index - which has a greater impact on the currency exchange rate - actually sagged. For March 2019, the Core PCE Price Index fell from 0.1 percent to 0.0 percent. The level in March did not meet market expectations which predicted no change.
Two hours after the reports were published, the US Dollar Index (DXY) edged down 0.07 percent to 97.98. This level is not far from the high level that was formed on April 25. But in general, the movement of the US Dollar is somewhat diverse against other major currencies. Against the Yen, the US Dollar strengthens rapidly, while against the Euro, the US Dollar weakens.
USD / JPY rose 0.18 percent to 111.79, while EUR / USD strengthened 0.15 percent to 1.1165. That's because tonight's economic data only has a medium-high impact. While in this week, there will be a series of data from the US and other countries that have a higher impact.
"There is more economic data (high impact) this week from all over the world. The market is looking forward to whether there will be a significant change," said Chuck Tomes, Portfolio Manager at Manulife Asset Management, told Reuters.
Two US economic data released on Friday night, namely GDP and UoM Consumer Sentiment, showed results that exceeded expectations. But the US Dollar weakened. US annual growth in gross domestic product (GDP) grew 3.2 percent in the first quarter of this year. This figure is higher than the previous GDP at the level of 2.2 percent, and market expectations that do not predict a change in GDP this time.
Nevertheless, the increase was only caused by inventory surplus, net exports, and government spending alone. In fact, these three factors are temporary and are likely to be corrected in the next quarter. On the other hand, consumer spending, which is the main component of GDP, actually declined quite dramatically.
Apart from GDP, there are also reports of US consumer sentiment that have a medium impact and are released by the University of Michigan. For April 2019, consumer sentiment was revised up to 97.2, higher than the Preliminary data at 96.9. Nevertheless, this figure is still lower than the previous month which reached level 98.4.
Both of these economic indicators, especially GDP which had a high impact on the US Dollar, failed to maintain the bullish US Dollar extension formed last Thursday. The US Dollar Index (DXY) actually dropped 0.13 percent to a low level of 97.98. When this news was written, the Dollar Index was depressed at the level of 97.94 in the 1 hour time frame.
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