Macroeconomics: After the revision of quarterly GDP, the annual PCE rate may bring benefits, but the Fed still needs reasons to avoid talking about "rate cuts"
Tomorrow, Friday night, at 20:30, the most critical inflation data of this week, the April core PCE, will be released. This week's market sentiment has remained in a low and volatile range, basically waiting for the release of PCE data.
Last Saturday, we initially expected the results of this PCE data, but after the adjustment of various data this week, our expectations must also be adjusted to a certain extent.
Especially after the expectation of the core PCE monthly rate changed from 0.2% last Saturday to the current 0.3%, we have to change our expectations.
Thursday's quarterly GDP data was revised from 1.6 to 1.3, which directly made the strong US economy in the first quarter relatively "mild", which may be an effective series of adjustments to the release of PCE data on Friday.
The year-ago value of the core PCE on Friday in April was 2.8, and the expected value was 2.8. The expected release value is likely to be 2.8 in line with expectations and the previous value, with a small probability of being lower than the expected value of 2.7, and a very small probability of being higher than expectations.
On Friday, the core PCE monthly rate in April was 0.3% in the previous value and 0.2% in the expected value. The current expected value is 0.3%. According to the expected adjustment, the result is expected to be 0.3, with a small probability of being lower than the previous value and a very small probability of being higher than the previous value.
If the expectation with the highest probability is followed,
The core PCE annual rate is in line with expectations and the same as the previous value. Inflation is under control, but there is still pressure to control, which is good news.
The core PCE monthly rate is in line with expectations and the same as the previous value. Inflation is still under pressure in the short term, but the pressure is under control, which is good news.
In fact, according to the monthly rate expectations, the expected value of 0.2, if the published value is greater than expected, it will mean that the short-term inflation pressure is greater. However, from now on, the expected value is adjusted to 0.3%, which can still complete this expected guidance.
At present, the data that is most likely to be more favorable is that the core PCE annual rate will be lower than 2.8. After all, the adjusted GDP in the first quarter is a downward revision, which means that the GDP in the second quarter is basically around 1.3. Under the premise of ensuring the strong economic expectation guidance, it is normal for inflation data to have some pressure, and the Fed only needs to show that it has the ability to control inflation. Once the core PCE annual rate is lower than 2.8. If inflation pressure is significantly reduced, the Fed will have to mention the issue of interest rate cuts again.
Personally, I think that the Fed does not want to cut interest rates, but the disadvantages of interest rate cuts are far greater than the crisis that may be caused by the current high interest rates. Therefore, it is better to avoid talking about actual interest rate cuts and use market expectations to guide the possibility of the Fed cutting interest rates this year. This "appetite-keeping" method may be more powerful. At least the "delay" can be delayed until the end of the election. The internal stability may have better results in interest rate cuts.
For Friday's PCE data, as long as there is no data higher than the previous value, it is basically good news. For the current market sentiment, as long as it is not obviously bad news, it can basically be regarded as good news. Moreover, as long as the data proves that the Fed is confident in controlling inflation, the market can naturally interpret itself as an optimistic interest rate cut, so that the risk market is encouraged to rise or maintain stability.
As for the rise after the release of tomorrow's data, Bitcoin will see a breakthrough of 72,000 in the short term. We have mentioned this position many times in the market analysis. It is currently near the previous high of the daily line and is also the resistance level of the daily line. We will see more after the breakthrough. As for Ethereum, just pay attention to the integer level of 4000.
No matter how favorable the data is, you should not be too FOMO in the short term. If it rises, you should pay attention to the breakthrough of the resistance level. Don't FOMO the future 100,000 or 200,000 because of a temporary rise. Bitcoin can reach this price in the future, but you may not live to see the moment when the price reaches it. The best choice is to make a staged judgment and look at the breakthrough of the key resistance level before making the next plan.
