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• US personal consumption expenditure prices in April surpassed expectations bolstering confidence in the Federal Reserve’s commitment to a hawkish stance and prolonged elevated interest rates.
• Core PCE, which excludes food and energy, experienced a 0.4% month-over-month increase in April 2023, surpassing market expectations of a 0.3% gain.
• The annual rate of core PCE, a key inflation metric favored by the Federal Reserve, unexpectedly accelerated to 4.7%, exceeding market expectations of 4.6%.
• The headline PCE also rose by 0.4% in April and registered a year-on-year increase of 4.4%, surpassing the 4.2% rate observed in March.

Note: The term "month-over-month" means comparing data from one month to the previous month, while "year-on-year" refers to comparing data from the same month in the previous year.

The elevated inflation reading has the potential to prompt the US Federal Reserve to maintain its current terminal rate, which could be perceived by investors as a hawkish stance and bearish for equities. The market’s reaction will largely depend on the outcome of forthcoming economic data releases in the coming week.

Furthermore, the data-driven support for the dollar may exert downward pressure on commodities such as Copper or Gold. Conversely, Crude oil could experience a positive effect from a stronger dollar, as the United States has emerged as a significant oil exporter. Increased trade activity could lead to greater demand for the dollar, bolstering its value and supporting currency appreciation as well.

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