EUR/USD Retreats as Dollar Gains Momentum Post-US Data Release
The Euro (EUR) experienced a pullback against the US Dollar (USD) on Friday, as the Greenback strengthened following the latest US economic data. At the time of writing, EUR/USD is trading at 1.1635, down from its daily high of 1.1628, but still on track for a second consecutive weekly gain. Market sentiment remains optimistic that the Federal Reserve (Fed) will cut interest rates next week, further bolstering the pair's upward trajectory.
The US Personal Consumption Expenditures (PCE) report for September, released with a delay, maintained a steady inflation outlook. Core PCE, the Fed's preferred inflation gauge, rose 0.2% month-over-month (MoM), in line with expectations, while the annual rate decreased to 2.8% from 2.9%. Headline PCE remained stable at 0.3% MoM, matching forecasts and unchanged from the previous month. Year-over-year, the Index stood at 2.8%, meeting expectations and surpassing August's 2.7%.
Beyond inflation, Personal Income increased by 0.4%, surpassing the 0.3% forecast, while Personal Spending rose 0.3%, matching expectations and decreasing from August's 0.5% increase.
The University of Michigan's preliminary survey indicated a positive shift in consumer sentiment as the year draws to a close. The Consumer Sentiment Index climbed to 53.3, surpassing the 52 forecast and outpacing the earlier reading of 51. The Expectations Index also strengthened, reaching 55, exceeding the 51.2 forecast and rising from 51.
The 1-year inflation outlook fell to 4.1% from 4.5%, while the 5-year measure slipped to 3.2% from 3.4%.
Labor market data released earlier in the week presented a mixed picture. ADP Employment Change decreased by 32K in November, significantly missing forecasts, while Challenger Job Cuts dropped to 71.3K and Initial Jobless Claims declined to 191K.
Overall, the consistent inflation figures, easing consumer inflation expectations, and subdued hiring signals reinforce the case for a dovish Fed stance. According to the CME FedWatch Tool, markets anticipate an 87% probability of a 25 basis point rate cut at the December 9-10 monetary policy meeting.
US Dollar Performance
The table below illustrates the percentage change of the US Dollar (USD) against major currencies. The USD demonstrated the strongest performance against the Japanese Yen.
| Currency | Percentage Change |
| --- | --- |
| USD | 0.10% |
| EUR | -0.10% |
| GBP | -0.03% |
| JPY | -0.19% |
| CAD | 0.66% |
| AUD | 0.27% |
| NZD | 0.06% |
| CHF | -0.18% |
The heat map below showcases the percentage changes of major currencies against each other, with the base currency on the left and the quote currency on top. For instance, selecting the US Dollar from the left column and moving horizontally to the Japanese Yen, the displayed percentage change represents USD (base)/JPY (quote).
