As the North American trading session gets underway, the US dollar is trading mostly higher against the major currency pairs, though it has pulled back somewhat from its session highs.
Attention is squarely focused on three major currency pairs — the EURUSD, USDJPY, and GBPUSD — from a technical standpoint, with markets bracing for a slate of significant US economic data due at 8:30 AM, including the PCE inflation index, durable goods orders, and initial jobless claims.
Core PCE for the month of April is expected to come in at 3.3% year-over-year, up from 3.2% the prior month. On a month-over-month basis, Core PCE is forecast at 0.3%. Headline PCE is expected at 0.5% MoM and 3.8% YoY.
Initial jobless claims are projected at 211K, compared to 209K recorded last week. Durable goods orders for April are anticipated to rise 3.5%, following a 0.8% gain the previous month. Excluding transportation, the figure is expected at 0.5% versus the prior 0.9%. Nondefense capital expenditures excluding aircraft are forecast at 0.4%, down from a preliminary reading of 3.4%.
The second revision to Q1 GDP will also be released, with expectations holding steady at 2.0%, matching the first estimate.
US equity markets are starting the session on a soft note. The Dow Jones Industrial Average is down approximately 65 points, the S&P 500 is off by around 12 points, and the Nasdaq is lower by roughly 110 points.
Crude oil is adding to upward pressure on the dollar, with prices rising around $2.90 as Middle East peace efforts continue to falter. Geopolitical tensions in the region remain highly elevated, contributing to risk-off sentiment in markets.
Overnight headlines painted a picture of continued instability surrounding Iran. Iran accused the United States of unauthorized naval movements, while Iranian state media reported that ships were stopped or turned back ahead of recent US military actions near Bandar Abbas. US Central Command (CENTCOM) confirmed overnight Iranian ballistic missile attacks directed toward Kuwait, as well as separate incidents near the Strait of Hormuz. Kuwait, for its part, stated it reserves the right to respond in defense of its national security.
Reports also emerged of explosions and air defense activity within Kuwait linked to missile and drone threats. Adding to the broader regional risk picture, Israel reportedly carried out targeted strikes in Beirut, while Iran's leadership continued to stress national security priorities and strategic objectives on the domestic front.
Why it matters
Core PCE is the Federal Reserve's preferred measure of inflation, making the April reading a closely watched data point for assessing the current pace of price pressures.
The PCE report, durable goods orders, initial jobless claims, and the second Q1 GDP revision are all scheduled for release simultaneously at 8:30 AM, making this a data-heavy morning for markets.
The nondefense capital expenditures excluding aircraft figure is expected at 0.4%, a sharp drop from the preliminary reading of 3.4%, highlighting a significant revision between estimates.
