DAILY MARKET OVERVIEW-01.03.2024
- 2024-03-01
DAILY MARKET ANALYSIS FRIDAY
Personal income grew 1.0% month-on-month (m/m) in January, a sizeable increase from December’s 0.3% gain, and above market expectations for a 0.4% increase.
Accounting for inflation and taxes, real personal disposable income was flat on the month relative to 0.2% growth in December.
Personal consumption expenditures rose 0.2% m/m, a notable deceleration from 0.7% growth in December, but in line with market expectations. Spending in real terms however fell by a -0.1%, led by weakness in goods spending (-1.1% m/m) even as services spending rose (+0.4% m/m).
On inflation, the Fed’s preferred inflation metric, the core PCE price deflator, rose from 0.1% to 0.4% on a monthly basis, but decelerated from 2.9% in December to 2.8% in January on an annual basis.
The personal savings rate rose in January to 3.8% from December’s 3.7% reading.
Key Implications
Given recent prints showing a notable pullback in spending and stalled inflation progress, today’s report was highly anticipated. Looking at spending, the deceleration in January was largely as expected, and in line with signals from the previously released retail spending report. After enjoying the holiday season, it appears consumers are now taking a breather. Reduced savings and a cooling labor market are likely to keep consumer spending at a modest pace for the remainder of the year.
The Fed’ s preferred measure of inflation continued its downward trek in January with the core PCE price deflator posting its 16th consecutive month of lower year-on-year growth. That said, at 2.6% the three month annualized rate of change on core PCE inflation rose above the Fed’s 2% target, (after falling below it last month to 1.6%) – a dynamic which could suggest some near term concerns. With the disinflation process progressing at an uneven pace while facing elevated upside risks and consumer spending starting to show some moderation, the central bank may be more inclined to continue exercising patience in its decision about when to cut rates.
- Gold price rises as US core PCE Price Index data remain soft in January.
- The underlying inflation data would deepen hopes of Fed rate cuts.
- Fed’s Collins expects the Fed’s path to 2% inflation will be bumpy.
Gold price (XAU/USD) delivers a strong recovery in Thursday’s early American session as the United States core Personal Consumption Expenditure Price Index (PCE) for January softens as expected. The soft underlying inflation data is expected to heighten hopes of Federal Reserve (Fed) rate cuts in the June monetary policy meeting. The opportunity cost of holding non-yielding assets, such as Gold, drops when the Fed considers rate cuts.
As expected, the annual inflation data decelerated to 2.8% from 2.9% in December. The monthly core PCE Price Index data increased by 0.4%, which aligns with market expectations. In December, the underlying inflation grew at a moderate growth of 0.2%. This would dampen the appeal of the US Dollar and bond yields. The US Dollar generally faces foreign inflows when the Fed shifts from a hawkish stance to neutral guidance.
Market participants were expected to pay close attention as it is the Fed’s preferred inflation tool. It doesn’t get distorted by base effects and provides a clear view of underlying inflation by excluding volatile items.
The market expectations for rate cuts in the March and May policy meetings are not expected to heighten significantly, even though the inflation report has turned out softer than expectations. Fed policymakers need good inflation data for months to consider a change in the monetary policy stance. Therefore, one good progressively declining inflation data point would not be enough to force policymakers to swiftly unwind their restrictive policy stance.
Daily Digest Market Movers: Gold price bounces back while US Dollar softens
- Gold price recovers sharply above $2,040 as a decline in the annual United States core PCE Price Index data in January is in line with expectations.
- The economic data is expected to flare up market expectations for rate cuts Federal Reserve rate in June.
- Currently, the CME FedWatch Tool shows that interest rates will remain unchanged in the range of 5.25%-5.50% in the next two policy meetings, which will take place in March and May. Traders see a 53% chance for a rate cut by 25 basis points in the June meeting.
- It would be worth seeing whether Fed policymakers provide concrete timing for rate cuts amid slower growth in price pressures.
- On Wednesday, New York Federal Reserve President John Williams said the rate-cut decision will depend on incoming data. Williams added that the central bank has come a long way to bring down inflation to the 2% target, but there is more work to do.
- Boston Fed Bank President Susan Collins sees the Fed’s path returning to 2% as bumpy due to tight labor market conditions and higher inflation readings in January. Collins expects that the Fed will start reducing interest rates later this year.
Technical Analysis: Gold price climbs to near $2,050
Gold price strongly recovers, jumping close to $2,050 on soft inflation data. The precious metal may look for an upside break of the Symmetrical Triangle formed on a daily timeframe. Usually, a Symmetrical Triangle formation could break out in either direction. However, the odds marginally favor a move in the direction of the trend before forming the triangle – in this case, up. A decisive break above or below the triangle boundary lines would indicate a breakout is underway.
The downward-sloping border of the Symmetrical Triangle pattern is plotted from the December 28 high at $2,088, and its upward-sloping border from the December 13 low at $1,973. Either way im super super bullish on GOLD and keep buying and buy more and just BUY BUY BUY GOLD $$$$$$$$$$$..
Prepared by: Mr.SAM KIMA, Senior Vice President