USD/PKR was edging up 0.43% to 154.880 in late Asian session on Friday.
USD/PKR traded below the 155 soft peg for a fourth straight day on Thursday ahead of key US GDP and PCE inflation numbers. Yesterday’s mixed data on jobless claims, manufacturing activity in Philadelphia and existing home sales, taken in conjunction with the upbeat housing and industrial data from Tuesday, strongly supported Fed’s view not to cut rates further.
According to CME’s FedWatch Tool, investors now saw zero percent chance of a rate cut occurring at the Federal Reserve’s policy meeting in January and a 4.3% chance of a cut in March.
With US-China trade tensions temporarily eased, investors now expect details of the agreement between the two countries. Yesterday China’s commerce ministry said Beijing and Washington were in close communication over the signing of the “phase one” deal, which envisages lower US tariffs on Chinese goods and higher purchases of US farm, energy and manufactured goods by China. However, the ministry disclosed no specific information regarding the agreement.
The US Dollar Index was little changed at 97.43 in late Asian trade on Friday.
Today’s market focus will be on the US GDP and PCE inflation data due out at 13:30 GMT and 15:00 GMT respectively. The final estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 2.1% in the third quarter of 2019, according to market expectations. The second GDP estimate for Q3, reported on November 27th, pointed to an annual growth of 2.1%. In Q2 the economy expanded at an annualized rate of 2.0%, according to final data.
Meanwhile, the Core Personal Consumption Expenditure (PCE) Price Index, which does not include prices of food and energy and represents the Federal Reserve’s preferred measure of inflation, is expected to increase 1.6% year-on-year in November, or matching the rate in October. Core PCE inflation was reported at 1.7% in September.
In case final GDP meets estimates and the Core PCE Price Index increases more than expected and approaches the Fed’s inflation objective of 2%, this would have a moderate-to-strong bullish effect on USD, as it would suggest no further need for interest rate cuts.
The monthly survey by Thomson Reuters and the University of Michigan may show that US consumer confidence improved in December from a month ago. The final index reading, which usually comes out two weeks after the preliminary data, probably came in at 99.2, confirming the preliminary value. In November, the consumer sentiment index stood at a final 96.8. In case expectations were met, this would have a moderate bullish effect on USD.
