US personal consumption expenditure preview

Personal consumption, income data along with PCE price index would be released from US at 12:30 GMT.

Why it matters?

• Personal consumption and income data provide information on consumer sentiment. Consumers tend to spend more, should they perceive upcoming time to be favorable.
   
• Increase in income also improves sentiment and purchasing power of consumers.
   
• PCE price index or PCE deflator is FED's preferred measure of inflation indicator. So this gauge is of extreme importance as FED's price stability mandate makes inflation is of higher priority as of now. Jobless rate is already near FED's longer term target level.

Past trends                     

• PCE deflator had been gaining last year, however started going down in latter half of the year as oil price fell close to 50%. In August PCE price index grew just 0.2% YoY but core PCE deflator remained at 1.3% YoY.
   
• Core PCE price index is also pointing to slowdown as lower energy prices might be feeding into prices and spending remains subdued.
   
• Personal income growth has remained positive since 2013, however at subdued pace. Income has picked up somewhat this year as improvement in the economy might finally be adding pressure on wages. In August, personal income grew by 0.3%.
   
• Personal Spending grew in August at 0.4%, after failing to grow in after growing 0.9% in June.

Expectation today 

• Personal income and spending, both are expected to grow by 0.2%.
• PCE is expected to grow at 0.2%.

Market impact 

• Dollar, which is clearly in back foot today, might gain back some of its charm if data improves on the upside.
   
• Any large selloffs in dollar is not expected. Short term treasury yield gains might be large over higher core PCE price increase.

FXCM US Dollar index is currently trading at 12060.