US CORE PCE INFLATION IN FOCUS AS FED RATE EXPECTATIONS SHAPE USD OUTLOOK
The US Bureau of Economic Analysis (BEA) is scheduled to release the August Personal Consumption Expenditures (PCE) Price Index data, a key inflation indicator closely monitored by the Federal Reserve. The report may provide further insight into the future path of US monetary policy.
Market expectations indicate that the core PCE Price Index is forecast to rise 0.3% month-on-month in August, following a 0.2% increase in July. The annual core PCE reading is expected at 3.4%, slightly above the previous month’s 3.3%. Headline annual PCE inflation is expected to remain around 3.7%.
The PCE data remains an important factor for interest-rate expectations, as markets assess the possibility of further Federal Reserve policy adjustments. According to the FedWatch Tool cited in the source, markets are pricing a 72.5% probability of a Fed rate increase in October ahead of the release.
A stronger-than-expected PCE result could reinforce expectations for higher interest rates and provide support for the US Dollar. A result in line with expectations may have a limited market impact, while a weaker reading could temporarily reduce support for the Dollar.
From a currency perspective, EUR/USD remains under pressure near the 1.1350 area, while the US Dollar Index (DXY) continues to trade close to its yearly high near 101.80. The pair remains below key moving averages, with technical indicators showing continued downside momentum.
From a technical perspective, EUR/USD support is located near 1.1324, followed by the 1.1200 area. On the upside, initial resistance is seen around 1.1400, with further resistance near 1.1470.
For market participants, the key factors remain US PCE inflation data, Fed rate expectations, US Dollar momentum, EUR/USD technical levels and changes in interest-rate expectations, which may provide further direction for currency markets.
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