EURUSD:
According to the US Bureau of Economic Analysis, the personal consumption expenditure (PCE) price index was in line with expectations in July. The overall PCE index rose 2.6% year-on-year in July, while the core PCE index, which excludes more volatile food and energy items, rose 2.9% over the same reporting period. Despite high inflation readings, traders are still increasing their bets on a Fed rate cut this month.
Fed Chair Jerome Powell hinted at the Fed’s readiness to ease policy in his speech at Jackson Hole earlier this month. Fed member Christopher Waller also signaled that a rate cut is appropriate, saying he would consider a more significant move.
Traders now estimate the probability of a 25 basis point (bp) Fed rate cut at the September monetary policy meeting at nearly 89%, up from 85% before the release of US PCE data.
The ongoing conflict between Russia and Ukraine means higher energy costs and increases geopolitical uncertainty in the eurozone, which tends to put some pressure on the euro.
Trade recommendation: BUY 1.1745, SL 1.1675, TP 1.1860
Origin: FreshForex
