**European Market Wrap: Dollar Steady, Stocks Ease, US PCE & Month-End in Focus**
*By Adam Button, originally published on ForexLive via TradingView News*
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### Overview
As European markets close on Friday, May 31, 2024, currencies have traded within tight ranges, global stocks have eased, and all eyes have shifted to the upcoming US PCE inflation data and month-end rebalancing flows. This wrap details the key moves in forex, equities, and fixed income markets, explores traders’ focus on the Federal Reserve’s next steps, and highlights the crucial factors shaping sentiment as the month draws to a close.
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### Dollar Holds Steady As Markets Await Key Data
The US dollar index stabilized through Friday’s European session, with most G10 currency pairs showing little appetite for readjustment ahead of potentially pivotal economic releases. Despite subdued trading, the dollar remained underpinned by resilient US data, moderately cautious risk sentiment, and doubts about the timing of Federal Reserve rate cuts after strong US inflation figures earlier this week.
**Key drivers for the dollar:**
– **Resilient US macro data:** Upbeat GDP data and sticky inflation have thrown cold water on hopes for an imminent rate cut.
– **Year-to-date outperformance:** The dollar index is set to finish May only marginally lower. Safe-haven demand and the US economic resilience have buffered it from notable losses.
– **Awaited PCE print:** The core Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation barometer, arrives later today and is expected to provide crucial guidance for the Federal Reserve’s next moves.
– **Month-end flows:** Portfolio rebalancing by large asset managers frequently introduces significant volatility on the last trading day of the month, adding uncertainty to the session.
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### Forex Market Snapshot: Tight Ranges Remain
Currency pairs saw subdued moves as traders avoided bold bets before the PCE print and the weekend.
– **EUR/USD:** Hovered near 1.0845, barely changed on the day. The euro underperformed this week due to softer inflation in the eurozone and caution ahead of next week’s European Central Bank policy decision.
– **GBP/USD:** Maintained 1.2735, almost flat, despite upbeat UK consumer confidence data. GBP’s recent strength has been tempered by the dollar’s steadiness and softening UK inflation.
– **USD/JPY:** Traded at 157.10-157.30, giving up early gains but still well above key support as intervention speculation lingers.
– **AUD/USD:** Settled around 0.6630, slightly lower, under pressure from softer Chinese data and general risk aversion.
– **USD/CHF and USD/CAD:** Traded within narrow bands, with neither cross showing conviction.
**Currency performance summary:**
– Dollar holds modest gains for May
– Euro sees renewed pressure on softening eurozone inflation
– Yen remains volatile on speculation over potential official intervention
– Commodity currencies weighed by weak Chinese data and risk sentiment
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### Key Economic Data: US PCE Inflation Takes Center Stage
Focus remains squarely on US core PCE inflation. With markets increasingly sensitive to inflation trends, today’s data will shape expectations for the timing and pace of the Fed’s next policy moves.
**What markets expect from US April PCE:**
– **Core PCE YoY:** Expected at 2.8 percent, unchanged from March
– **Core PCE MoM:** Expected at 0.3 percent
– **Headline PCE YoY:** 2.7 percent forecast
– **Headline PCE MoM:** 0.3 percent forecast
The core PCE number is especially crucial, as Fed officials have consistently cited it as the best measure of underlying inflation. A softer print could spark renewed rate-cut speculation and weigh on the dollar and US yields. Conversely, a hotter reading would bolster the
Read more on GBP/USD trading.