FX in Narrow Ranges Ahead of Canada GDP, US PCE Inflation

USD majors have coiled into tight ranges over the past 24 hours as markets continue to digest the implications of stagflation scenario painted by Chairman Bernanke on Wednesday followed by a slump in Q1 GDP and weekly claims on Thursday. Instead, emperor's birthday in Tokyo and the royal wedding in London have kept the heavy hitters away from the trading desk.

EUR/USD has consistently found selling interest around 1.4850. Cable has carved out a base at 1.6625, while USD/JPY slide has been contained around 81.25.

The start of Friday's US session will see the 8:30ET release of Fed's preferred measure of inflation - Personal Consumption Expenditures (PCE) index. Consensus for core m/m figure is 0.1%, down from 0.2% prior. A slowdown would go a long way to adding credibility to FOMC thesis of anchored inflation expectations. However, we also note PCE indices released for the 1st quarter on preliminary basis - headline rose 3.8% q/q while the ex-food/energy number was 2.2%. Both marked the highest level since Q3 of 2008.

Concurrently, Canada will release its own GDP scorecard. Posted on a monthly basis, this backward looking February report further suggests some troubling signs of a North American slowdown with consensus of flat growth m/m - marking Canada's first month of no growth in 6 months. Also at 8:30am ET, US is set to release its monthly personal spending and income metrics, followed by Chicago PMI at 9:45ET. Consensus for the PMI stands at 68.6

Later in the day at 9:45, Chicago PMI is set to slow for the second consecutive month after 6 months of increases to 68.8. On the US earnings front, Chevron and Merck will round out a busy week of quarterly results.

By GG - AshrafLaidi.com Staff