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

US PCE Price Index Overview

Thursday's US economic docket highlights the release of the Core Personal Consumption Expenditure (PCE) Price Index for May, scheduled later during the early North American session at 12:30 GMT. The Fed's preferred inflation gauge is expected to rise by 0.4% MoM during the reported month as compared to the 0.3% in April. The yearly rate, however, is anticipated to moderate to 4.7% in May from the 4.9% previous.

How Could it Affect EUR/USD?

Speaking at the ECB's forum on Wednesday, Fed Chair Jerome Powell reaffirmed a faster policy tightening path and said that the US central bank remains focused on getting inflation under control. Higher-than-expected PCE results will reinforce the Fed's hawkish policy outlook and provide a fresh lift to the US dollar. Conversely, the softer print would still be far above Fed’s official 2% target and is more likely to be overshadowed by growing recession fears. This, in turn, favours the USD bulls and suggests that the path of least resistance for the EUR/USD pair is to the downside.

Eren Sengezer, Editor at FXStreet, outlined important technical levels to trade EUR/USD: “The pair is facing immediate resistance at 1.0470 (Fibonacci 23.6% retracement of the latest downtrend). In case the pair fails to reclaim that level, it is likely to extend its slide toward 1.0400 (psychological level), 1.0380 (end-point of the latest downtrend) and 1.0360 (June 15 low).”

“On the upside, the pair could recover toward 1.0500 (psychological level) and 1.0520 (Fibonacci 38.2% retracement, 50-period SMA, 100-period SMA on the four-hour chart) if buyers managed to flip 1.0470 into support,” Eren added further.

Key Notes

  •   US PCE Inflation May Preview: Inflation becomes moot

  •   EUR/USD Forecast: Euro's recovery prospects diminish

  •   EUR/USD Price Analysis: Sees a downside below the crucial support of 1.0430

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.