BREAKING: USD weakens after PCE reading

US data pack for  December was released at 1:30 pm GMT today. Attention was mostly on Fed’s favorite inflation gauge - core PCE inflation data which came in line with expectations. Decrease in private spending in December (GDP showed that consumption is slowing). Data certainly positive from the Fed's perspective, looking at further tightening.

Data pack for December:

• Headline PCE inflation: 5.0% YoY vs 5.0% YoY expected (5.5% YoY previously). Prices for goods were up 4.6.% and prices for services increased 5.2%. Food cost went up 11.2% and energy prices increased 6.9%. Compared to the previous month, the PCE Price Index rose by 0.1%.

• Core PCE inflation: 4.4% YoY vs 4.4% YoY expected (4.7% YoY previously)

• Personal spending: -0.2% MoM vs -0.1% MoM expected (0.1% MoM previously). Consumer spending is cooling due to high interest rates and prices for goods and services and as the holiday season wrapped up. Spending fell for both goods, namely gasoline and motor vehicle and parts and services, mainly housing, air transportation and health care.

• Personal income: 0.2% MoM vs 0.2% MoM expected (0.4% MoM previously).It was the smallest gain since April. The increase primarily reflected increases in compensation and proprietors' income. The increase in compensation reflected increases in private wages and salaries in both services-producing industries and goods-producing industries. The increase in proprietors' income reflected an increase in nonfarm income that was partly offset by a decrease in farm income.

Fed's preferred inflation indicator moves lower, however it still remains at its highest level since 1991. Source: Bloomberg via ZeroHedge

Incomes came in line with expectations, however spending fell more than expected. That is the second straight month of spending declines Source: Bloomberg via ZeroHedge

EURUSD is rather unimpressed by today's PCE data. The pair jumped above 1.0870 level. Source: xStation5