Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Retail Therapy Gives Markets A Lift, US PCE Inflation In Focus

By CMC Markets (Michael Hewson)Market OverviewMay 27, 2022 07:36
Retail Therapy Gives Markets A Lift, US PCE Inflation In Focus
By CMC Markets (Michael Hewson)   |  May 27, 2022 07:36
Saved. See Saved Items.
This article has already been saved in your Saved Items

European markets spent most of yesterday edging cautiously higher, with the FTSE 100 shrugging off the UK government’s decision to impose a 25% windfall tax on the oil and gas sector, while at the same time unveiling a fiscal stimulus package.

The decision to impose the controversial tax appears to have prompted a review of their investment plans, on the part of BP (LON:BP), who had previously committed £18 billion of investment into the UK economy by the end of 2030. Who could possibly have foreseen that?

Putting the windfall tax to one side, yesterday’s gains started to accelerate during the late afternoon after US markets opened, with retail stocks leading the way higher, on both sides of the Atlantic.

US retail helped set the tone with strong gains from the likes of Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) who topped the gainers on the S&P 500 after Dollar Tree lifted its full-year outlook for revenues to just shy of $28 billion, after enterprise same-store sales rose by 4.4%.

With all the doom and gloom surrounding US retail over the past couple of weeks, the numbers were a welcome tonic, with this week’s decent numbers from Macy’s (NYSE:M), and Nordstrom (NYSE:JWN) adding to the momentum, as US markets finished a strong session with decent gains.

As we look ahead to a mixed European open it’s been another choppy week, albeit with a positive bias, with the FTSE 100 on track for its strongest week of gains since March, driven by a rebound in the retail sector, with the likes of Ocado (LON:OCDO), Kingfisher (LON:KGF), Marks and Spencer Group (LON:MKS) performing strongly.

The battle to contain the inflation genie appears to have started in earnest, with the Federal Reserve fresh from raising rates by 25bps in March, following that up with a 50bps rate rise earlier this month, with the promise of another two 50bps moves in June and July.

In the recent CPI numbers, there does appear to be increasing optimism that inflationary pressures are starting to near their peak, although the jury remains out on that. While headline CPI has seen a modest fall to 8.3% in April, producer prices have proved to be slightly more resilient than perhaps Fed officials would like.

The only positive is that the strength of the US dollar is likely to act as an anchor on upward inflationary pressure, and this could start to exert some downside pressure on the headline numbers, although there are early signs that the US dollar move higher has started to run out of steam, as we look to a second successive week of declines, after six consecutive weeks of gains.

Yesterday in the latest quarterly Q1 GDP numbers, the Core PCE number fell back from 5.2% to 5.1%, and US policymakers will be looking for further signs that the current bout of inflation is starting to run out of steam and slip back.

Today’s US PCE Core Deflator could offer some clues about that, with the hope that we could see a decline to 4.9% from 5.2% in March. PCE Core Deflator is the Fed’s preferred inflation targeting measure and a softer number here, could give further encouragement to the view that we might see a rate pause in September, after Atlanta Fed President Bostic floated the idea earlier this week. The PCE Deflator is expected to fall to 6.2% from 6.6%.

Personal Spending for April is expected to rise by 0.7%, down modestly from 1.1% in March, with personal income set to increase 0.5%.

EUR/USD – we have trend line resistance from the highs this year, as well as the 50-day MA, currently at 1.0760 area. We currently have support at the 1.0530 area.

GBP/USD – still struggling to gain traction above the 1.2600 area. We need to see a move beyond the 1.2630 area to argue a short-term base is in. Below the 1.2470 area, argues for a move to the 1.2320 area. Above 1.2630 argues for a return to the 1.2830 area

EUR/GBP – finding support at the 0.8480 area with resistance at 0.8530. Still range-bound within the wider range of 0.8200/0.8600. A move through 0.8470 retargets the 0.8420 area.

USD/JPY – continues to hold above the 50-day MA, with a break potentially opening a move towards the 123.00 area. We currently have resistance at the 128.30 area, as well as trend line resistance from the highs this month currently at 127.80.


Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

Original Post

Retail Therapy Gives Markets A Lift, US PCE Inflation In Focus

Related Articles

Ipek Ozkardeskaya
‘Very Challenging’, Indeed By Ipek Ozkardeskaya - Jun 23, 2022

Market optimism couldn’t survive Jerome Powell’s testimony yesterday, as he said that a recession is possible, and that calling a soft landing is ‘very challenging’ under the...

Retail Therapy Gives Markets A Lift, US PCE Inflation In Focus

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
som sithy
som sithy May 27, 2022 9:05
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email