EUR/USD struggles near 1.3060 area, just above two-year low ahead of US PCE data

EUR/USD consolidates in a range just above a two-year low touched earlier this month.
The ECB’s dovish outlook is seen undermining the shared currency amid a bullish USD.
Traders await the US PCE data – the Fed’s preferred inflation gauge – for some impetus.

Haresh Menghani FXStreet

The EUR/USD pair continues with its struggle to attract any meaningful buyers and oscillates in a range around the 1.0360 area during the Asian session on Friday. Spot prices remain close to a near-one-month low touched on Thursday and seem poised to register its lowest weekly close since November 2022.

Moreover, the shared currency might continue with its relative underperformance on the back of the divergent European Central Bank (ECB) and the Federal Reserve (Fed) monetary policy outlook. In fact, the ECB cut interest rates for the fourth time this year last Thursday and left the door open to further easing in 2025. In contrast, the Fed signaled earlier this week that it would slow the pace of rate cuts in 2025. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Meanwhile, the Fed's hawkish shift comes on top of persistent geopolitical risks and concerns about US President-elect Donald Trump's tariff plans. This, along with the threat of a US government shutdown ahead of the Friday night deadline, continues to weigh on investors' sentiment and assists the US Dollar (USD) to preserve the post-FOMC strong gains to a two-year high. This further validates the negative outlook for the EUR/USD pair and supports prospects for further losses.

The USD bulls, however, take a brief pause for a breather and now look to the US Personal Consumption Expenditure (PCE) Price Index, due for release later during the North American session. The Fed's preferred inflation gauge should provide a fresh impetus to the USD and the EUR/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favor of the USD bulls, suggesting that any immediate negative reaction to softer US data is more likely to be short-lived.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.