U.S. personal income and spending likely accelerated in April

The U.S. headline PCE inflation is likely to have decelerated in April from March. According to a TD Economics research report, the headline PCE inflation probably slowed to 1.6 percent from 1.8 percent, indicating a rise of 0.1 percent in prices on month. Consistent with the CPI report, higher energy is expected to have slowed further on a year-on-year basis in spite of strong gains on the month, while food prices are likely to have changed little in deflation territory.

The core PCE index is expected to have risen modestly by 0.1 percent sequentially, consistent with the CPI print. This would result in another drop in the core inflation rate to 1.4 percent year-on-year as compared with 1.6 percent year-on-year.

“We continue to look through the recent weakness in core inflation as driven by several one-offs (wireless cellphone services, apparel) as fundamental factors (economic activity, labor market conditions, exchange rate pass-through) continue to point to gradual firming”, stated TD Economics.

Meanwhile, nominal PCE is likely to have recorded a strong rise of 0.4 percent in April, indicating a bounce back in spending on durables and moderate rises throughout nondurables and services expenditures. This likely to mark a strong beginning to the second quarter and in line with real PCE tracking near a strong rate of 3 percent.

“We also expect a solid showing for April personal income (0.4%), with slowed in the previous month”, added TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 68.8628. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex