When is the US June Core PCE Price Index and how could it affect EUR/USD?

US Core PCE Price Index Overview

Friday's US economic docket highlights the release of the Core Personal Consumption Expenditure (core PCE) Price Index for June, scheduled later during the early North American session at 12:30 GMT. The Fed's preferred inflation gauge is expected to rise by 0.5% MoM during the reported month as compared to the 0.3% in May. The yearly rate, however, is anticipated to hold steady at 4.7% in June.

How Could it Affect EUR/USD?

The Federal Reserve hinted earlier this week that it could slow the pace of the hiking campaign at some point amid signs of a slowdown, reaffirmed by Thursday's disappointing US Q2 GDP print. A weaker PCE report could further fuel expectations that the US central bank would not raise interest rates as aggressively as previously expected. This could aggravate the bearish pressure surrounding the US dollar and offer some support to the EUR/USD pair.

The immediate market reaction, however, is more likely to be short-lived amid renewed worries about an energy crisis in Europe and Italian political uncertainty. Furthermore, stronger inflation data could revive bets for a 50 bps Fed rate hike move at each meeting in the remainder of this year. This would be enough to prompt some USD short-covering, suggesting that the path of least resistance for the EUR/USD pair is to the downside.

Eren Sengezer, Editor at FXStreet, outlined important technical levels to trade the major: “EUR/USD was last seen trading above 1.0230, where the Fibonacci 38.2% retracement level of the latest downtrend forms the upper limit of the 10-day-old trading range. In case this level is confirmed as support, the next bullish targets could be seen at 1.0300 (psychological level, Fibonacci 50% retracement, 200-period SMA on the four-hour chart) and 1.0370 (Fibonacci 61.8% retracement).”

“On the downside, additional losses toward 1.0200 (psychological level, 50-period SMA) and 1.0150 (Fibonacci 23.6% retracement, 100-period SMA) could be witnessed if 1.0230 support fails,” Eren added further.

Key Notes

  •   EUR/USD Forecast: Next bullish target aligns at 1.0300

  •   US Dollar Index: Sellers push harder and break below 106.00 ahead of PCE

  •   EUR/USD sticks to the consolidative phase so far – UOB

About the US PCE Price Index

The Personal Spending released by the Bureau of Economic Analysis, Department of Commerce is an indicator that measures the total expenditure by individuals. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth: While Personal spending stimulates inflationary pressures, it could lead to raise interest rates. A high reading is positive (or Bullish) for the USD.