When is the US March 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, scheduled later during the early North American session at 12:30 GMT. The gauge is anticipated to have risen by 0.3% in March, matching the previous month's reading. The yearly rate, meanwhile, is expected to have eased to 4.6% from 5% in February. Moreover, the Core PCE Price Index - the Fed's preferred inflation measure - likely edged lower to a 4.6% YoY rate and rose 0.3% in March.

Analysts at TD Securities (TDS) offer a brief preview of the report and write: “We expect core PCE inflation to have risen at a still firm 0.3% m/m pace in March (in line with consensus and also matching Feb's advance). While below the core CPI's 0.4% m/m gain, the increase will keep the 3m AR pace high at around 4.7%. The y/y rate likely remained unchanged at 4.6%, suggesting the path to normalization in price gains will probably take longer than expected. Conversely, personal spending is expected to be muted (TD: 0.0% m/m, consensus: -0.1%), which would confirm the loss of momentum from consumer outlays toward the end of the quarter. The details of the spending part of the report will be very important, particularly the breakdown between goods and services.”

How Could It Affect EUR/USD?

Ahead of the key macro data, the US Dollar (USD) climbs to a fresh weekly high and drags the EUR/USD pair further below the 1.1000 psychological mark. A surprisingly stronger report will further point to persistent inflationary pressure and reaffirm market bets for another 25 bps lift-off at the next FOMC policy meeting in May. This, in turn, should provide a goodish boost to the Greenback and set the stage for an extension of the pair's retracement slide from a 13-month high touched earlier this week.

Conversely, weaker PCE data will fuel fresh speculations that the US central bank will pause the rate-hiking cycle after May. This might prompt aggressive USD selling and allow the EUR/USD pair to resume its recent well-established uptrend witnessed since mid-March. Nevertheless, the data should infuse volatility in the markets and allow traders to grab short-term opportunities on the last day of the week.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook and outlines important technical levels to trade the EUR/USD pair: “The 100-period Simple Moving Average and the Fibonacci 23.6% retracement of the latest uptrend form strong support area at 1.0950/1.0970. In case the pair falls below that area and starts using it as resistance, it could extend its downward correction toward 1.0900/1.0880 (psychological level, 200-period SMA).”

“On the upside, sellers could turn hesitant if EUR/USD reclaims 1.1000 (psychological level, static level, 50-period SMA) and stabilizes there. In that case, 1.1050 (static level) and 1.1070 (end-point of the latest uptrend) could be seen as next resistance levels,” Eren adds further.

Key Notes

  •   US Core PCE Preview: Why this is a lose-lose situation for the US Dollar

  •   EUR/USD Forecast: Euro trades dangerously close to key support area

  •   EUR/USD breaks below 1.1000 to print 2-day lows, focus remains on key data

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.