**EUR/USD Rebounds as Fed Rate Cut Bets Strengthen After PCE Report**
*Adapted from the original by Anil Panchal at FXStreet, with supplemental insight from Reuters and CNBC.*
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The EUR/USD currency pair experienced a notable rebound on Friday, driven by shifting market sentiment regarding the Federal Reserve’s interest rate trajectory. This renewed optimism followed the release of crucial U.S. economic data, particularly the April reading of the Personal Consumption Expenditures (PCE) Price Index, which is widely regarded as the Fed’s preferred measure of inflation. As investors processed the implications of cooling inflationary pressures, bets on Fed rate cuts gained momentum, sparking renewed demand for the euro against the U.S. dollar.
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## Key Takeaways
– The EUR/USD pair moved higher on the final trading day of the week amid increased optimism for Fed rate cuts
– The April U.S. PCE Price Index, in line with expectations, reassured markets of easing inflationary pressure
– Weaker-than-anticipated Chicago PMI added to dollar weakness
– U.S. Treasury yields fell as a result of the economic releases, further contributing to dollar declines
– Market participants are now pricing in stronger chances of at least one Fed rate cut before the end of 2024
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## U.S. Economic Data: A Trigger for EUR/USD
The latest U.S. economic releases acted as direct catalysts for the EUR/USD movement. Investors closely watched Friday’s set of data for clues about possible shifts in the Fed’s monetary policy stance. The data included:
### PCE Price Index (April)
– The headline U.S. PCE Price Index rose 2.7 percent year-on-year in April, equaling the reading from March and aligning precisely with market forecasts
– The Core PCE Price Index, which excludes volatile food and energy prices, increased by 2.8 percent year-on-year, also matching expectations and unchanged from the previous month
– On a monthly basis, the core measure edged up by 0.2 percent, softer than the prior month’s 0.3 percent uptick
These results signaled a continuation of gradual progress in bringing inflation toward the Federal Reserve’s long-term target of 2 percent. The data also eased concerns that inflation could re-accelerate, which had been a dominant narrative earlier in the year after several higher-than-expected reports.
### Personal Spending and Income
– Personal Spending for April increased by 0.2 percent on the month, below the 0.3 percent consensus forecast and sharply below the prior month’s 0.7 percent surge
– Personal Income, meanwhile, inched up 0.3 percent, slightly stronger than anticipated
This combination indicated that, while consumers remain relatively resilient, there are signs of moderation in consumption that could further help restrain price pressures.
### Other Key Numbers
– The University of Michigan Consumer Sentiment Index for May was revised slightly higher to 69.1 but remained
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