**EUR/USD Rebounds as Fed Rate Cut Bets Strengthen After US PCE Data**
*Adapted and expanded from reporting by Anil Panchal for FXStreet*
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The EUR/USD currency pair experienced a notable rebound following the release of the latest US Core Personal Consumption Expenditures (PCE) Price Index data. As market participants interpreted the new data as supportive of a shift in the US Federal Reserve’s policy stance, expectations for a rate cut by the Fed strengthened. This article provides a comprehensive analysis of the Forex market’s reaction, delving into the factors behind the shift in sentiment, technical analysis for EUR/USD, and the broader macroeconomic context that influences the pair.
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### **Overview of Recent Price Movement**
– The EUR/USD pair climbed above 1.0800 on Friday, June 28, 2024, following weaker-than-anticipated inflation data from the United States.
– The price recovery came after the pair slipped earlier in the week, with renewed bullish momentum emerging as US economic indicators signaled cooling inflationary pressures.
– As of the European session’s close, EUR/USD traded near 1.0815, marking its strongest intraday gain in the past two weeks.
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### **US Core PCE Data: Signals From The Fed’s Favorite Gauge**
The market closely watched the May reading for the US Core PCE Price Index, which is one of the Federal Reserve’s preferred measures of inflation:
– **Data Highlights:**
– The Core PCE Price Index rose by 0.1 percent in May, down from 0.3 percent in April and below the market forecast of 0.1 percent.
– The annualized Core PCE figure stood at 2.6 percent, marking its lowest reading since March 2021.
– Headline PCE inflation remained stable, insulating markets from a sharper risk-off response.
– **Implications:**
– Softening price pressures were seen as easing the urgency for the Fed to maintain high interest rates.
– Treasury yields dropped in the immediate wake of the report, with the 2-year and 10-year yields both declining by several basis points.
– Market-implied odds for a September rate cut rose above 70 percent after the data release, up from roughly 60 percent prior.
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### **Federal Reserve Policy Outlook and Market Reactions**
Interest rate expectations are a critical driver of Forex market sentiment, especially for pairs like EUR/USD which reflects the relative monetary stances of the Federal Reserve and the European Central Bank:
– **Federal Reserve Signals:**
– While the Fed left interest rates unchanged at its most recent meeting, Chair Jerome Powell emphasized that further progress on inflation would be necessary before rate cuts could be justified.
– However, multiple Fed officials have indicated that the central bank is “data dependent” and prepared to adjust its policy path as inflation evolves.
– **Market Dynamics:**
– With economic growth slowing and inflation appearing to cool
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