On Thursday, Citi announced its decision to exit a long position in the currency pair, citing recent economic data that suggests potential risk to their initial forecast. The firm had entered the trade with expectations that the core Personal Consumption Expenditures (PCE) price index would print below the Federal Reserve’s forecasts.
However, the latest quarterly core PCE price index reported a 3.7% increase compared to the expected 3.4%, leading Citi to reassess the situation.
Citi had placed the trade based on the anticipation that the core PCE data, scheduled for release tomorrow, would come in below the predictions of both Citi and the Federal Reserve, which stood at 2.7% year-over-year and 2.8% year-over-year, respectively. The trade was established with a reference spot of 0.6530 at 8:32 AM EST on April 25th.
The move to exit the position was triggered by the higher-than-expected quarterly core PCE price index, which could indicate an upside risk to the upcoming core PCE data. This development prompted Citi to take a cautious approach and exit the trade to avoid potential losses associated with the event risk of the data release.
The firm reported a modest gain of 0.54% from the trade, choosing to secure this profit rather than face the uncertainty of the market’s reaction to the core PCE data. The decision reflects the firm’s risk management strategy in response to economic indicators that may influence market conditions.
Citi’s exit from the AUD/USD position highlights the influence of economic data on trading strategies and the importance of timely decision-making in the face of evolving market information. The core PCE price index is a key indicator of inflation and is closely monitored by the Federal Reserve when setting monetary policy.
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