**EUR/USD Rebounds as Fed Rate Cut Expectations Rise After PCE Data**
*By [Original Author, if listed: Sagar Dua], with additional research and analysis.*
The euro rose significantly against the US dollar on the last Friday of June, supported by renewed expectations for Federal Reserve interest rate cuts following the latest Personal Consumption Expenditures (PCE) data. Currency markets were focused on the PCE report, a closely watched inflation gauge favored by the Fed, which signaled softer inflationary pressures. This development has notably increased bets on the potential for monetary easing by the US central bank within this year.
## PCE Data Sparks Euro Strength
The Bureau of Economic Analysis released its core PCE Price Index—a critical indicator used by the Federal Reserve to evaluate inflation—showing that inflationary pressures are easing. The May reading came in at 2.6% year-over-year, matching expectations and revealing a continuous cooling from the 2.8% figure seen in April. The core measure, which strips out volatile food and energy prices, also echoed this moderation trend.
– **Headline PCE Inflation:** Remained unchanged at 2.6% on a yearly basis.
– **Monthly Core PCE:** Rose just 0.1%, in line with forecasts.
The data have bolstered views among investors and traders that the Fed may start easing its monetary policy sooner rather than later, possibly as soon as September. This sentiment added downward pressure to the US dollar, which enabled the euro to find upward momentum.
## Impact on Federal Reserve Expectations
Prior to the release of the PCE data, the markets had been divided on the Federal Reserve’s timeline for rate cuts. However, following the softer inflation numbers, many economists now expect the Fed to adopt a more accommodative stance in the months to come.
– **CME FedWatch Tool:** The likelihood of a 25-basis-point rate cut in September increased to over 65%.
– **2024 Rate Cut Outlook:** Derivatives markets now reflect stronger probability for at least two Federal Reserve rate cuts before year-end.
Federal Reserve Chair Jerome Powell and other central bank officials have consistently highlighted the importance of sustained and convincing evidence that inflation is moving toward the 2% target before making policy changes. However, the steady improvement in inflation data has provided comfort to investors that such evidence may now be accumulating. As a result, yields on US Treasuries declined, putting further pressure on the dollar.
## EUR/USD Price Action and Technicals
The EUR/USD currency pair saw a robust rebound after the PCE release. Investors seeking higher returns outside the USD contributed to the euro’s appreciation. By the end of Friday’s session, the pair approached the 1.0730 region, paring earlier losses and bouncing off weeklong support levels.
**Key Technical Levels:**
– **Immediate Resistance:** 1.0750 (recent high and psychological resistance)
– **Major Support:** 1.0670 (weekly lows),
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