On July 26th, the Bureau of Economic Analysis of the US Department of Commerce released personal consumption expenditure (PCE) data for June. The market reacted quickly to this, and investors' concerns about inflation seem to have eased as data shows an improvement in the inflation environment. The release of this data provides new clues for the future direction of the Federal Reserve's monetary policy.

The annual PCE price index in the United States dropped from 2.6% in May to 2.5% in June, while the core PCE price index recorded an annual rate of 2.6%, higher than the expected 2.5%. In terms of monthly rate, the core PCE price index recorded 0.2% in June, also higher than the expected 0.1%. These data indicate that although inflationary pressures have increased, the overall inflation environment remains within a controllable range.

Market reaction

Short term interest rate futures in the United States rose slightly after the release of inflation data; Traders expect the Federal Reserve to keep interest rates unchanged in July and begin cutting rates in September.

After the data was released, the market reacted quickly, and spot gold rose to a daily high of $2379.31, now reported at $2375.84 per ounce.

The short-term decline of the US dollar index DXY has widened to 20 points and is now at 104.29. The yield of US treasury bond bonds fell to an intraday low, and the 10-year treasury bond bond yield was 4.22%. In addition, the yield of Eurozone treasury bond also fell slightly after the release of US data. The yield of German 10-year treasury bond is now 2.44%.

The release of PCE data in the United States has not had a significant technical impact on major currency pairs. However, the volatility in the bond market suggests that market participants may be reassessing inflation expectations and the Federal Reserve's monetary policy path.

Institutional analyst perspective

Renowned institutional analyst Cameron Crise stated that although the year-on-year change in the core PCE index was slightly higher than expected, these data were not enough to prevent the Federal Reserve from cutting interest rates in September. Meanwhile, there is no indication that the Federal Reserve needs to cut interest rates early or by more than 25 basis points. The bond market has responded to weaker income/expenditure data, while inflation data seems insufficient to support any rebound.

Analyst Rick Meckler said that the personal income and expenditure data for May in the United States were both revised to 0.4%, which is a solid improvement in income and expenditure, and inflation has eased. Therefore, this fairly good report further supports the claim of a soft landing. After a difficult week, the market has the opportunity to rebound and rise today.

Overall, the moderate increase in PCE data for June in the United States provides the possibility for the Federal Reserve to start cutting interest rates in September. However, there is still disagreement in the market regarding whether the Federal Reserve will take action at the July meeting. Short term interest rate futures in the United States rose slightly after the release of inflation data, and traders expect the Federal Reserve to keep interest rates unchanged in July.

The release of PCE data in the United States provides new information and analytical perspectives for the market. Although inflation data shows a certain upward trend, the overall improvement in the inflation environment may help Fed officials enhance their confidence that inflation is moving towards the 2% target. Investors should closely monitor the policy movements of the Federal Reserve and potential market reactions in the future.