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Key events ahead: US PCE Deflator, UK 3Q GDP Revision - RBS

FXStreet (Bali) - The FX Strategy Team at RBS breaks down the key economic reports to watch out for on Wednesday, including US PCE deflator and UK Q3 GDP revision.

Key Quotes

"Tomorrow’s session includes several important US releases, most notably the October PCE deflator. The CPI report released last week showed that headline inflation held steady at 1.7% y/y while the core reading actually edged up to 1.8% y/y, despite a broader concern about disinflationary pressure coming from falling commodity prices and the stronger USD. The FOMC minutes from the October meeting indicated that Fed officials are not particularly concerned with downside risks to inflation amid the recent slowdown in global growth momentum and the stronger USD. We anticipate the core PCE deflator held unchanged at 1.5% y/y for a sixth consecutive month – not enough to merit a re-pricing of FOMC expectations in either direction, likely shifting the focus squarely to next Friday’s payroll report. Similar to today’s price action, EUR/USD remains susceptible to short positioning squeezes ahead of the US holiday weekend and key EUR event risk later this week (Flash CPI on Friday)."

"Elsewhere in the PCE report, growth in employment and wages and salaries should bode well for both nominal income and spending in October. The spending measure is not adjusted for price effects in energy, which may weigh on reported spending. Still, falling fuel prices is likely a positive for discretionary spending going forward."

"Durable goods orders are also due in the US and may have posted another headline decline, with the volatile non-defence aircraft sector again weighing on headline orders. Strength seen in the ISM manufacturing new orders comes at odds with declines in core capital goods orders, and we anticipate a pickup in core orders as a result. The Chicago PMI and new home sales are released in the US as well."

"Away from the US, there are plenty of releases, most of which are second tier. A revision to UK 3Q GDP is due, and we anticipate the pace of growth will go unrevised at 0.7% q/q. CBI reported sales are also released in the UK. A keynote address by ECB Vice President Constâncio at the FT’s Ensuring Future Growth Banking Summit is the most notable event on an otherwise quiet day for central bank speakers."

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