EUR/USD edges higher as traders digest in-line US PCE inflation data

The Euro (EUR) edges modestly higher against the US Dollar (USD) on Friday, extending its intraday advance as investors weigh the latest US Personal Consumption Expenditures (PCE) inflation report, which came mostly in line with forecasts and offered little fresh impetus.

At the time of writing, EUR/USD is hovering near 1.1690, recovering from three-week lows with modest gains of 0.20%. Meanwhile, the US Dollar Index (DXY), which gauges the Greenback’s value against six major peers, is trading around 98.25, easing slightly from Thursday’s high, its highest level since September 3.

The August PCE inflation report showed price pressures largely in line with expectations, signaling that progress in bringing inflation down remains limited. The core PCE Price Index, the Federal Reserve’s (Fed) preferred gauge of underlying inflation, rose 0.2% MoM, matching forecasts and down from July’s originally reported 0.3%, which was revised lower to 0.2%.

On an annual basis, the core measure held steady at 2.9%, underscoring that inflation is easing but still above the Fed’s 2% target.

The headline PCE Price Index rose 0.3% on the month, matching expectations and up from 0.2% in July, while the annual rate ticked up to 2.7% in August from 2.6% a month earlier.

The report also showed that personal income rose 0.4% in August, matching July’s pace and slightly above expectations of 0.3%, while personal spending climbed 0.6%, up from the prior month’s 0.5%, suggesting consumer demand remains firm.

Looking ahead, market attention will shift to the University of Michigan’s survey on consumer sentiment and inflation expectations for September, along with remarks from Fed Governor Michelle Bowman later in the day.