Focus on PCE in Exchange Rates... "Fluctuations Repeat Until US Interest Rate Cut Becomes Visible"

April PCE Release on the 31st (Local Time)

[Image source=Yonhap News]

Daishin Securities forecasted on the 27th that the USD-KRW exchange rate will fluctuate until the environment for a U.S. interest rate cut becomes visible. The direction of the dollar is expected to become clearer depending on the Personal Consumption Expenditures (PCE) data to be released this week.

Juwon Lee, a researcher at Daishin Securities, stated, "Disinflation must progress in the Personal Consumption Expenditures Price Index (PCEPI), similar to the Consumer Price Index (CPI), for a sense of relief regarding (interest rate cuts) to return."

The dollar's strength expanded after the April CPI announcement. This was because the data met market expectations, increasing hopes for a rate cut in September. However, hawkish content in the Federal Open Market Committee (FOMC) minutes and surprises in the Purchasing Managers' Index (PMI) have left uncertainties in monetary policy.

Meanwhile, the U.S. S&P Global PMI significantly exceeded expectations, reaching the highest level in a year, supporting the Federal Reserve's hawkish stance. Lee explained, "New orders in the service sector increased, and inflationary pressures remain across manufacturing and services. Although upward cost pressures from high raw material prices and labor costs persisted, these were not immediately passed on to consumer prices."

He added, "The market is likely to seek direction from this week's preliminary U.S. Gross Domestic Product (GDP) and PCE inflation data. Until the environment for an interest rate cut becomes visible, the exchange rate will continue to search for its direction."