- The underlying Personal Consumption Expenditure (PCE) Price Index is forecast to rise 0.3% month-on-month and 2.8% year-on-year in April.
- Markets believe that the Federal Reserve will keep the monetary policy rate unchanged in June and July.
- A weak PCE inflation report could weigh on the Dollar with immediate reaction.
The core Personal Consumption Expenditure (PCE) Price Index, the US Federal Reserve's (Fed) preferred measure of inflation, will be released on Friday by the US Bureau of Economic Analysis (BEA) at 12:30 GMT.
PCE Index: What to expect from the Federal Reserve's preferred inflation measure
The price index of PCE Core, which excludes volatile food and energy prices, is considered the most influential measure of inflation in terms of the Fed's positioning. The index is expected to rise 0.3% monthly in April, matching the increase in March. April core PCE is projected to grow at an annual rate of 2.8%, while headline PCE inflation is expected to remain stable at 2.7% year-on-year.
The US Bureau of Labor Statistics reported earlier this month that the Consumer Price Index (CPI) rose 3.4% annually in April, while the core CPI rose 3.6% in the same period, below the 3.8% in March.
Previewing the PCE inflation report, analysts at TD Securities said: “The CPI and PPI data suggest that core PCE inflation lost momentum in April after a strong start to the year. In fact, we expect the core index advances 0.22% monthly compared to 0.32% in March and compared to the 0.29% expansion of the underlying CPI in April We have revised our forecast from an initial estimate of 0.25%. We also expect the general index to rise 0.23% monthly. while the underlying super probably cooled to 0.26%.”
When will the PCE inflation report be released and how could it affect EUR/USD?
PCE inflation data is scheduled to be released at 12:30 GMT. The monthly core PCE price index is the Fed's preferred inflation reading as it is not distorted by base effects and provides a clear view of core inflation by excluding volatile elements. Therefore, investors pay close attention to the monthly underlying PCE figure.
The CME Group's FedWatch tool shows that markets currently see virtually no chance of a Fed rate cut in either June or July. The probability that the US central bank will leave the monetary policy rate unchanged in September is around 48%.
Market positioning suggests that the US Dollar (USD) faces two-way risk heading into the event. Should the monthly core PCE rise more than 0.3% in April, the immediate market reaction could make investors refrain from pricing a rate cut in September and help the USD outperform its rivals. On the other hand, a reading of 0.2% or lower could trigger a USD sell-off ahead of the weekend and open the door to a rise in EUR/USD.
FXStreet analyst Eren Sengezer offers a brief technical outlook for EUR/USD and explains:
“Although EUR/USD fell in the first half of the week, the Relative Strength Index (RSI) indicator on the daily chart remains slightly above 50, highlighting the lack of bearish pressure. Following the uptrend which ended on May 16, the pair stabilized above the 1.0780-1.0800 region, where the 50-day, 100-day, and 200-day simple moving averages (SMA) meet if EUR/USD falls below that area. and starts using it as resistance, technical sellers could take action. In this scenario, 1.0700 (psychological level, static level) could be seen as the next bearish target before 1.0600 (2024 low set on April 16).”
“On the upside, resistances lie at 1.0900 (static level, psychological level), 1.0950 (static level) and 1.1000 (psychological level, static level). For buyers to remain interested, however, the 1.0780-1.0800 area needs remain intact as a support.”
US Dollar PRICE this week
The following table shows the percentage change of the US Dollar (USD) against the major currencies listed this week. The US Dollar was the strongest currency against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.10% | -0.31% | 0.21% | -0.11% | -0.09% | -1.06% | |
| EUR | -0.15% | -0.07% | -0.42% | 0.07% | -0.31% | -0.33% | -1.18% | |
| GBP | -0.10% | 0.07% | -0.40% | 0.11% | -0.23% | -0.19% | -1.13% | |
| JPY | 0.31% | 0.42% | 0.40% | 0.48% | 0.18% | 0.30% | -0.79% | |
| CAD | -0.21% | -0.07% | -0.11% | -0.48% | -0.33% | -0.30% | -1.33% | |
| AUD | 0.11% | 0.31% | 0.23% | -0.18% | 0.33% | 0.06% | -0.90% | |
| NZD | 0.09% | 0.33% | 0.19% | -0.30% | 0.30% | -0.06% | -0.97% | |
| CHF | 1.06% | 1.18% | 1.13% | 0.79% | 1.33% | 0.90% | 0.97% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will represent USD (base)/JPY (quote).
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
