/market_analysis/forex-market-analysis-core-pce-data-media-trends-27-jan-2024/

Forex Market Analysis: Core PCE Data & Media Trends 27 Jan 2024

January 26, 2024

Daily Forex Analysis: 27 Jan 2024

CURRENCIES:

Event Overview:

  • US Dollar Forecast focuses on upcoming Core Personal Consumption Expenditures (core PCE) data.
  • Release date: January 26, 2024, at 12:30 AM +02:00.

Importance of Core PCE Data:

  • The U.S. Bureau of Economic Analysis is set to release core PCE data.
  • Core PCE is the Fed’s favored inflation gauge, influencing the U.S. dollar’s near-term trajectory.
  • Results may impact the Federal Open Market Committee’s (FOMC) guidance at the January meeting.

Estimates for Core PCE:

  • Forecast suggests a 0.2% rise in core PCE for December.
  • Anticipated annual rate decrease to 3.0% from November’s 3.2%.

Policy Context:

  • Policymakers aim to restore price stability post-pandemic through a historic streak of interest rate hikes.

Dollar’s Response to Core PCE:

  • For the US dollar’s recovery, PCE data should indicate a stall in disinflation progress.
  • A positive scenario could make the Fed cautious about substantial borrowing cost cuts, potentially delaying the easing cycle.

Potential Market Impact:

  • If core PCE falls below 3.0%, the greenback might experience a sharp downside turn.
  • Weak inflation numbers could support expectations of deep interest rate cuts, leading to lower Treasury yields.
  • Lower yields could reduce the attractiveness of the U.S. currency.

Key Consideration:

  • The outcome of the core PCE reading will likely shape market expectations and influence the U.S. dollar’s short-term performance.

Analyst Perspective:

  • Diego Colman, Contributing Strategist, shares insights on the importance of Core PCE data in guiding markets ahead of the Fed decision.

Further Reading:

  • Most Read: Gold Price Forecast – Core PCE Data to Guide Markets Ahead of Fed Decision.

STOCK MARKET:

Media Industry Consolidation Overview:

  • Wall Street anticipates the next significant media merger, but companies seem hesitant.

Company Responses:

  • Comcast (CMCSA) CEO Brian Roberts expressed contentment with the current company status, setting a high bar for any potential moves beyond the existing plan.
  • Netflix (NFLX) dismissed merger speculation, particularly in acquiring linear assets, believing further M&A among traditional entertainment companies wouldn’t substantially alter the competitive landscape.

Analyst Predictions:

  • Bank of America analyst Jessica Reif Ehrlich suggests Paramount (PARA), Warner Bros. Discovery (WBD), and Comcast’s NBCUniversal could be impacted by consolidation within the next 18 to 24 months.
  • Speculation arises that two of these three players might merge.

Market Impact:

  • Paramount’s stock rose 5% following reports of production studio Skydance Media’s interest in taking Paramount private.
  • Media giants have been taking measures to address Wall Street concerns, including mass layoffs, cost reductions, and strategic shifts in their business models.

Challenges in the Industry:

  • Media companies faced challenges in appeasing investors despite cost-cutting efforts and strategic adjustments.
  • Valuation levels remain depressed, and profitability in streaming services, except for Netflix, is a concern.

Expert Analysis:

  • Experts predict that challenges in the industry, such as valuation and streaming profitability, may drive companies to explore potential deals and consolidation.

Focus on Comcast’s Peacock:

  • Comcast’s streaming service, Peacock, has been central to the consolidation debate.
  • Full-year losses for Peacock were $2.7 billion, slightly exceeding company estimates.
  • Comcast remains committed to Peacock, expecting meaningful improvement in 2024 despite the 2023 peak in annual losses.

Strategic Moves by Comcast:

  • Comcast, relying heavily on linear television, surprises investors by investing approximately $110 million to acquire exclusive rights to an NFL playoff game for Peacock.

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