The worries about the consuming spending in US rose again today with the dovish release of April US consuming spending which accounts for about 70% of the US GDP.

The figure came unchanged monthly, while the market was waiting for rising by 0.2%, after increasing in March by 0.4%, despite personal income rising in April by 0.4%, while the market was waiting for rising by 0.3%, after no monthly change in March.

The market was already worried about the consuming performance in US after, April US retail sales came unchanged monthly, while the consensus was referring to rising by 0.2%, after increasing in March by 1.1% following falling by 0.5% in February.

US PCE which is the Fed's favorite gauge of inflation came also today to show lower than expected inflation pressure in April by rising by only 0.1% y/y, after increasing by 0.3% in March as it has done in February, after rising in January by only 0.2% to be the weakest pace of rising since October 2009, While the Fed's yearly inflation target is 2%.

it comes also in line with April US CPI which came previously showing falling by 0.2% y/y, after decreasing by 0.1% in March which is the weakest since also October 2009.

These weak inflation figures mirror the Greenback strength which could continue to last Apr. 13 and also energy prices relative weakness which can make the Fed in no rush to start raising the Fed funds rate from its current level between zero to 0.25% which has been unchanged since December 2008, while hiking the interest rate in US can expose it to undesirable deflation risks.

The Fed can keep waiting for increasing of the economic activity can drive the inflation expectations up and gives hope for reaching its yearly 2% goal.

The gold could approach 1190$ level, as the greenback came under pressure broadly directly following the release of these figures which weighed further on the interest rate outlook, after last Friday down revision of US Annual GDP to contract by 0.7% in the first quarter of this year, after the preliminary reading came previously showing growth by 0.2%, after expansion by 2.2% in the fourth quarter of last year.

EURUSD could get over the uncertainty about the Greek situation and the retreating of May EU Manufacturing PMI to 52.2 from 52.3 in April to be traded currently close to 1.095, after it has been trading just below 1.09 this morning.

GBPUSD could also spike up above 1.5250, after it had been trading below 1.52, after the release of UK Manufacturing PMI of May which rose to 52, while the median forecast was referring to 52.5 after 51.8 in April.

Kind Regards

FX Market Strategist

Walid Salah El Din

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