As markets increasingly anticipate a more accommodative stance from the Federal Reserve in the next year, bond yields and the U.S. dollar are expected to trend lower in the short term. However, this sentiment could shift if economic data reveal robust growth and heightened inflationary pressures. Traders are advised to closely monitor the economic calendar for such indicators.
The first days of the week may not see any significant risk events, but Friday will carry importance with the release of Personal Income and Outlays, a key report containing information on consumer spending and, more importantly, core PCE, the Fed's favorite inflation measure.
For Federal Open Market Committee's (FOMC) path, as discounted by market participants, to remain dovish, personal spending and core PCE must exhibit restraint. A failure to show moderation would signal that the economy is still running hot and that it would be premature to ease the policy stance - a scenario that could spark a hawkish repricing of interest rate expectations, boosting the greenback in the process.
The below show the screen capture from DailyFX's economic calendar, illustrates consensus estimates for the upcoming personal income and outlays report.
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