EUR/USD rises on fueled speculation about a Fed rate cut following PCE data

In North American trading, the EUR/USD pair rises as a result of weaker US core PCE inflation statistics. As the Fed’s core PCE index drops to 2.9%, expectations of an interest rate reduction rise, supporting the rise in EUR/USD.

Early in the North American session, the EUR/USD increased by about 0.14% as US prices declined from November’s levels but stayed above the US Federal Reserve’s target. The major is trading at 1.0866 following a sharp decline to 1.0812.

Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, increased 2.6% annually in the year ending in December as anticipated, while core PCE fell short of expectations, falling from 3.2% to 2.9%. Following the release of the data, investors’ bets that the Fed would start lowering rates by the summer were validated, and the EUR/USD spiked higher and reached a daily high of 1.0885 before falling down towards the present exchange rates.

The CME FedWatch Tool predicts a Fed rate cut of 51.4%, with a 37.8% basis point. US Treasury bond yields have risen, limiting the EUR/USD rise.

German consumers remain pessimistic due to economic uncertainty, while Spain’s unemployment rate fell to 2007 levels. The Federal Reserve’s monetary policy decision on January 30-31 is expected to be the main focus. GfK Consumer Confidence for February dropped from.25.4 to -29.7.