Summary:

• March US PCE core Y/Y: +1.9% vs +1.9% exp
• US dollar trading firmly higher on the day
• GBPUSD testing long-term rising trendline

Inflation is in focus this afternoon with the latest data from the US coming not long after the German release. Similar to its European equivalent there appears to have been little change in the inflation dynamics in the US with the core PCE reading for March coming in inline with both the expected and the prior print at 1.9% Y/Y. This inflation metric is often seen as the Fed’s preferred measure as the central bank often quote it when referring to price pressures. In remaining so close to the 2.0% mandate held by the bank it is likely supportive of further rate increases going forward – even if this week’s meeting is widely expected to see no change. 

 PCE inflation remains close to target and shows that price pressure in the US are still firm. Source: XTB Macrobond

The US dollar recorded an impressive gain last week and is on track for its largest monthly gain since Trump’s inauguration. One of the main causes of this recent USD strength has seemingly been the rise in yield on US government debt with the 10-year yield reaching its highest since 2014 recently. According tot he latest COT report there could be some signs of caution however with the level of net speculative positioning falling to record lows. 

 Net speculative positioning in the TNOTE has fallen to its lowest level on record. Source: CFTC

Looking across the USD pairs one that stands out lately is the GBPUSD with large declines in excess of 600 pips in recent weeks. The market is now approaching a potentially critical level. Firstly the region from 1.3600-1.3710 has previously acted as support after being broken as resistance and could be seen to be an important swing level. Furthermore a rising trendline going all the way back to March last year is being retested. 

 GBPUSD could be sitting at a key level as it tests a rising trendline going back over a year. Source: xStation