Since reaching its peak two years ago, inflationary pressure has significantly declined, but the pace of improvement has slowed in recent months. The PCE index is the preferred indicator for the Federal Reserve to measure price pressure. The Fed's goal is to keep the PCE inflation rate around 2% in the long term to maintain a healthy economic state.

It is worth noting that due to daylight saving time and the Thanksgiving holiday, this PCE data will be released at 23:00 Beijing time on Wednesday, instead of the usual 20:00 on Thursday.

According to economists, the PCE price index is expected to rise 0.20% month-on-month and 2.30% year-on-year in October. The core PCE inflation rate, excluding the more volatile food and energy prices, is expected to rise 0.30% month-on-month and 2.80% year-on-year.

Get a sneak peek at major financial events, discover investment opportunities early, and open the Futubull APP [Market] - [US Stocks]- [Financial Calendar」>>

Although economists expect both indicators to rise compared to September, analysts believe that price pressure is still improving. Ameriprise Financial's chief economist Russell Price noted that the higher readings in October "will not undermine the long-term trend."

Base effect

The base effect may cause a slight increase in October's PCE inflation. Price explained that the lower inflation figures in October 2023 mean that this week's data will appear stronger in comparison.

Overall, despite some setbacks this autumn and the impact of the base effect, economists still expect inflation to continue easing in 2025.

Lpl financial's chief economist Jeffrey Roach said, "These could be potential illusions, and I do not think this necessarily represents a change in trend." Roach expects that by early 2025, the year-on-year PCE inflation rate will "appear very favorable."

Important categories

Earlier this month, economists at bank of america wrote: "While inflation has indeed made progress, it shows signs of stagnating above the Fed's 2% target, and we believe the market should not panic." They pointed to some special driving factors for the price increase in October (such as the rise in airfares) and the economic fundamentals that support further disinflation.

Many data sources used in the PCE report come from the consumer price index (CPI) report published earlier each month. Overall, the October CPI report showed a slight rise in inflation due to the increase in food, housing, and used car prices.

However, the key point is that the weights of these two indices are different. Housing and auto prices have less impact on PCE than on CPI. Price pointed out that healthcare costs have the highest weight in the PCE index, which has improved in the CPI report, meaning PCE readings may be lower than analysts' expectations.

Roach also mentioned two other noteworthy categories: airfare prices and financial services and insurance costs, which have been high this year but have now eased.

Will the Fed cut interest rates in December?

Investors have lowered their expectations for a Fed rate cut in recent weeks. According to data from the cme FedWatch tool, the market expects there is about a 45% chance that the Fed will keep interest rates unchanged at the upcoming December meeting. A month ago, this probability was 24%.

Roach expects the Federal Reserve to skip a rate cut in December or January next year, and then possibly implement up to four rate cuts within 2025. Analysts from bank of america, however, anticipate a rate cut in December but add, "Given the resilience of economic activity and stubborn inflation, the pace of rate cuts seems likely to be more moderate."

Gold Technical Analysis

Fxstreet analyst Haresh Menghani stated that from a technical perspective, gold prices rebounded well from the recent 61.8% Fibonacci retracement level on Tuesday, and the subsequent strong performance is favorable for call traders. However, the oscillators on the daily chart have not yet confirmed a positive bias, indicating that gold's upward movement is more likely to encounter strong resistance near the 100 period simple moving average (SMA) on the 4-hour chart, which is located around the $2645 area. If this level is surpassed, gold prices could further climb to the $2665 area, challenging the resistance at $2677-$2678, with the ultimate goal of reclaiming the $2700 psychological mark.

On the other hand, the $2624-$2622 area may provide some support for gold prices, followed by the $2600 target. If gold prices fall significantly below this latter level, it would be seen as a new bearish trigger point, looking towards the $2569-$2568 range of the 100-day SMA. Following that is the $2537-$2536 area at the monthly low. If gold prices fail to maintain the aforementioned support levels, it will be regarded as a new bearish trigger point, paving the way for a corrective decline to reinitiate from the historical high of around $2800 reached in October.

For more investment tips, mooers can click to view.Tonight, the usa PCE is released! Understand important macro data in one article.

Editor/rice