The EUR/USD currency pair took a small step back. It is currently trading at as high at 1.1645 after economic data from the United States came in below expectations. The Index has recently announced an annual increase of 2.8%. This increase is in line with expectations and an increase from August’s 2.7%. This remarkable stability in these figures has provided a significant overall support for the value of the US dollar. Not surprisingly, market participants are now looking forward to the first interest rate cut from the Federal Reserve.
The new Personal Consumption Expenditures (PCE) Index came in steady at 0.3% MoM. This figure is in line with predictions and represents no increase from last month. Investors have been laser focused on what the Federal Reserve’s next monetary policy moves will be. According to the CME FedWatch Tool, there is an 87% chance of at least a 25 basis point interest rate cut at the meeting on December 9-10.
The Consumer Sentiment Index skyrocketed to 53.3, well above the 52 forecast and the prior 51 reading. This surge further concentrates the very useful insights that can be gained from the PCE data. Consumer confidence is important to economic stability and growth, so this increase is a positive sign with everyone hopeful for more growth to come. The Expectations Index experienced similar strides, climbing to 55, signaling a generally optimistic view of the future among consumers about what’s to come for the economy.
The weight of these economic indicators have had a meaningful impact on market sentiment. As traders were processing the news, the EUR/USD currency pair retreated from its daily high of 1.1628. The market’s focus will likely remain on the Federal Reserve’s actions in the coming weeks, particularly in light of the anticipated interest rate cut.
Broadly speaking, economic analysts say the consistent PCE numbers and improving consumer confidence might give the Federal Reserve the justification it needs to begin easing monetary policy. Importantly, this shift can happen without significant fears about inflationary pressures. The reality of today’s economy is that inflation continues to be a major concern. The inflation outlook overall for consumers could be an argument for a more accommodative monetary stance.