EURUSD edged higher near 1.0700 ahead of May’s US core PCE inflation data.
In Friday’s European session, the EURUSD recovered to reach the critical support level of 1.0700. The major currency pair climbs as market sentiment stays bullish ahead of the United States’ (US) core Personal Consumption Expenditure price index (PCE) data for May. Which will be released on Friday at 12:30 GMT.
The US dollar falls on robust Fed rate-cutting predictions.
The underlying inflation figures will influence market speculation on the Federal Reserve’s (Fed) lowering interest rates from the September meeting. According to CME FedWatch program, which also predicts two rate cuts this year. Contrary to market predictions, Fed policymakers expect only one rate decrease this year. As shown in the most recent dot plot.
On Thursday, Atlanta Fed President Raphael Bostic stated. That rate decreases would be acceptable when they are confident that inflation is on a clear path to 2%. When questioned about a specific date for rate cuts, Bostic stated. “I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year,” according to Reuters.
The US PCE report is expected to show that core price pressures increased at a slower rate of 0.1% compared to 0.2% in April. Annually, the underlying Inflation is expected to have slowed to 2.6% from 2.8% in April.
Daily Market movers: EURUSD is expected to experience volatility ahead of significant Eurozone events.
The EUR/USD remains stable near 1.0700 as the US dollar falls in value. While the Euro’s outlook seems uncertain ahead of the French election results and the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) data for June, which will be released on Tuesday.
Investors are concerned that the installation of a new administration in France will increase spending plans. Thereby aggravating the budget problem. The uncertainty surrounding French elections grew after French President Emmanuel Macron asked for a sudden election. Following his party’s defeat in the European elections to Marine Le Pen’s far-right National Rally. Nevertheless, The establishment of the French left. Sometimes known as the Popular Front, does not guarantee the National Rally’s triumph.
Investors will pay special attention to the Eurozone preliminary HICP data. Which will provide hints regarding the European Central Bank’s (ECB) future rate decreases. The ECB’s rate-cutting cycle began at its policy meeting in early June, when it dropped its benchmark interest rates by 25 basis points.
Meanwhile, the broader fall in price pressures in major Eurozone countries has raised prospects of further rate cuts by the ECB. In France, the preliminary annual Consumer Price Index (CPI) fell as expected to 2.5% from 2.6% the previous month. Annual HICP in Spain decreased to 3.5% from the previous reading of 3.8%,remained higher than expected at 3.4%, while price pressures in Italy were mixed.
