When is the US August PCE Price Index and how could it affect EUR/USD?

US PCE Price Index Overview

Friday's US economic docket highlights the release of the Personal Consumption Expenditure (PCE) Price Index for August, scheduled later during the early North American session at 12:30 GMT. The gauge is foreseen to rise by 0.3% during the reported month against the 0.1% fall recorded in July. The yearly rate is anticipated to have accelerated to 6.6% in August from 6.3% previous. Meanwhile, the Core PCE Price Index - the Fed's preferred inflation measure - likely edged up to a 4.7% YoY rate in August from the 4.6% in the previous month.

Analysts at Commerzbank offer a brief preview of the report and explain: “Excluding food and energy, the deflator probably increased by 0.4% MoM. This is a bit less than the recently released core CPI rate. This is because rents have a lower weight in the deflator than in the CPI basket (15% vs. 32.6%); rents rose quite strongly in the CPI in August. In addition, medical services have a much higher weighting in the deflator, and here the government health services included in the deflator, in contrast to the CPI, have a dampening effect on prices.”

How Could it Affect EUR/USD?

The markets started pricing in the possibility of another supersized 75 bps Fed rate hike move in November following the release of hotter-than-expected August US consumer inflation figures. A stronger-than-expected PCE report will reaffirm expectations and boost the US dollar. Conversely, a softer print could force the USD to prolong this week's sharp retracement slide from a two-decade high amid a further descent in the US Treasury bond yields. The immediate market reaction, however, is more likely to be short-lived, warranting some caution before placing aggressive directional bets around the EUR/USD pair.

Eren Sengezer, Editor at FXStreet, offers a brief technical overview and outlines important technical levels to trade the EUR/USD pair: “The Relative Strength Index (RSI) indicator on the four-hour chart holds above 50 and the pair continues to trade above the 50-period SMA, confirming the bullish bias. On the upside, 0.9850 (Fibonacci 61.8% retracement of the latest downtrend) aligns as initial resistance. With a four-hour close above that level, the pair could target 0.9900 (psychological level, 100-period SMA) and 0.9950 (200-period SMA).”

“Supports are located at 0.9800 (Fibonacci 50% retracement), 0.9750 (Fibonacci 38.2% retracement, 50-period SMA) and 0.9700 (psychological level, 20-period SMA),” Eren adds further.

Key Notes

  •   US August PCE Inflation Preview: Will it trigger a dollar correction?

  •   Core PCE Preview: Forecasts from six major banks, strong price pressures

  •   EUR/USD Forecast: Quarter-end flows could boost the euro

About the US PCE Price Index

The Personal Spending released by the Bureau of Economic Analysis, Department of Commerce is an indicator that measures the total expenditure by individuals. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth: While Personal spending stimulates inflationary pressures, it could lead to raise interest rates. A high reading is positive (or Bullish) for the USD.