US inflation remains stubborn, with the probability of a Fed rate hike in June rising to 60%!
The possibility of the Fed raising interest rates by 0.25 percentage points in June is about 60%, as the US dollar index and Treasury yields rise.
US Inflation Remains Stubborn
US April durable goods orders rose 1.1% month-on-month, beating expectations of -1.0%, and up from the previous value of 3.20%.
US April core PCE price index rose 0.4% month-on-month, beating expectations of 0.30%, and up from the previous value of 0.30%.
US April core PCE price index rose 4.7% year-on-year, beating expectations of 4.6%, and up from the previous value of 4.6%.
Financial website Forexlive commented on the US core PCE: Inflation is a problem, but consumption remains hot.
After the data was released, US Treasury bonds gave up their gains. The yields on 2-year and 5-year US Treasury bonds erased their losses and hit new highs within a week.
The US dollar index DXY rose 20 points in the short term and is now trading at 104.04.
Will the Fed Continue to Raise Interest Rates?
After the release of the PCE data, traders increased their bets on the Fed raising interest rates.
Financial website Forexlive: The Fed will raise interest rates again, with a 58%-42% probability of a rate hike in June and a 100% probability of a rate hike in July. The likelihood of another rate hike is small. To some extent, the Fed will have to pause and evaluate the rate hike.
After the data was released, the implied yield on policy rate futures contracts rose, pricing in a 60% chance that the Fed will raise the target range for the benchmark interest rate (currently 5%-5.25%) by 0.25 percentage points at its June meeting.
Earlier futures contracts showed a 60% chance that the Fed would not raise interest rates in June.