US: Core PCE inflation to be the highlight this week - ING

The core PCE inflation reading (Thu) will be the highlight of a busy US calendar in the week ahead, with investors mindful of the Fed's structural low US inflation concerns as noted in the latest FOMC minutes, suggests the research team at ING.

Key Quotes

“Core PCE is the central bank's preferred measure of inflation - and with the prior month's reading running significantly below the 2% target at 1.3% YoY - it's no surprise why the Fed doves are sounding the alarm. We may need to see more than just a trickle up to 1.4% YoY (consensus) to spur any major inflationary sentiment. In addition, we'll also have the Senate confirmation hearing for incoming Fed Chair Powell (Tue) - while outgoing Fed Chair Yellen will also separately testify to Congress (Wed). Markets will be closely watching for any subtle disparity of views on Fed policy and big picture outlook for the US economy. Data wise there's also trade balance (Tue), second estimate of 3Q US GDP (Wed) and ISM manufacturing (Fri) - among a host of other second-tier releases - to note.”

“The focus will also be on inflation data in Europe this week, with the Nov flash EZ CPI release due (Thu). Consensus is looking for a slight uptick in both the headline and core readings; while the latter may only nudge up to 1% YoY, this could be marginally supportive for the EUR - given that EZ markets are arguably underpricing similar inflation and policy risks relative to their US counterparts.”