The US Bureau of Economic Analysis (BEA) will release the August Personal Consumption Expenditures (PCE) Price Index on Friday at 12:30 GMT, with investors closely monitoring the report as it represents the Federal Reserve’s preferred measure of inflation.
Expectations for PCE data
The core PCE Price Index, which excludes food and energy, is forecast to rise 0.2% month-over-month (MoM) in August, slightly below July’s 0.3% increase. On an annual basis, core PCE inflation is projected to remain unchanged at 2.9%, while headline PCE inflation is seen ticking up to 2.7%.
Market participants often react strongly to the PCE release, given its weight in shaping Fed policy decisions. In September’s press conference, Fed Chair Jerome Powell noted that tariff-related inflation risks needed to be monitored but confirmed the central bank’s own forecasts: 2.7% for headline and 2.9% for core PCE inflation in August.
Analysts at TD Securities expect core PCE prices to have decelerated modestly to 0.19% MoM, with headline inflation likely at 0.23% due to higher food and energy prices. They also see personal spending and income moderating to 0.4% and 0.3%, respectively.
Implications for EUR/USD
The US Dollar (USD) gained ground after the Fed’s September decision, as Powell’s remarks and the revised Summary of Economic Projections (SEP) suggested policymakers will proceed cautiously with further easing after multiple cuts this year.
Given Powell’s projections, the PCE release may not dramatically shift expectations, but the monthly core reading will be key. A stronger-than-expected figure — particularly 0.4% MoM or higher — could fuel a USD rally and weigh on EUR/USD heading into the weekend. Conversely, softer data could support the pair.
The CME FedWatch Tool shows markets are fully pricing in a 25 basis point (bps) cut in October, with around a 75% probability of an additional 25 bps reduction in December. While the PCE report is unlikely to alter expectations for October, it could influence views on the Fed’s year-end policy stance.
Technical outlook for EUR/USD
Eren Sengezer, European Session Lead Analyst at FXStreet, notes that EUR/USD remains within the lower half of a nine-month ascending regression channel. The Relative Strength Index (RSI) on the daily chart sits slightly above 50, reflecting a neutral bias in the short term.
On the downside, the 50-day Simple Moving Average (SMA) and the channel’s lower boundary converge around 1.1680–1.1670. A failure to hold above this zone could invite sellers, with further support at 1.1580 (100-day SMA) and then 1.1500. On the upside, resistance is seen at 1.1870, followed by the psychological 1.2000 level.
