US Inflation Data on Watch

The Nasdaq is reversing sharply lower today ahead of the latest US core PCE data due this afternoon. Losses kicked in yesterday on the back of the downward revision to Q1 GDP which was recorded at 1.3% from 1.6% prior. The drop has raised concerns over the health of the US economy amidst weaker labour market readings recently but still-high inflation. Fed policymakers have been firmly hawkish in recent comments, citing the need to hold rates steady for now while inflation remains elevated. Looking at the price action today, current moves suggest traders are wary of hawkish inflation data today. Given the Fed’s reliance on core PCE as a key inflation gauge, the data holds the potential to create plenty of market volatility.

Risks Around Today’s Data

Looking to today’s data then, the risk if that we see further selling in the Nasdaq if PCE comes in at or above forecasts (0.3% expected) this should keep USD bid near-term. If we see any upside surprise this will weigh heavily on near-term easing forecasts, pushing USD higher and sending Nasdaq lower. On the other hand, if we see data undershooting forecasts today, this might raise hopes that inflationary pressures are topping out, leading to increased September rate-cut expectations. In this scenario we’ll likely see some USD selling, allowing Nasdaq to recover.

Technical Views

Nasdaq

The reversal lower from highs around the 18,912.17 mark is seeing price fast approaching a retest of the 18,406.68 prior highs. This is a key pivot point for the market and while it holds as support, the focus is on a continuation higher the focus remains on further upside.