Euro Forecast: Will Core PCE Tip the Scales for the Fed?
Author: Matt Weller
Date: August 25, 2026
Overview
The upcoming release of the Core Personal Consumption Expenditures (PCE) index is highly anticipated as it will be the last report before the Federal Open Market Committee (FOMC) meeting on September 16. This report is crucial as it will provide insights into inflation trends and potentially influence the Fed's decision on interest rates.
Core PCE Expectations
Key Takeaways:
- Expectations for the Core PCE are set at 0.2% month-over-month (3.3% year-over-year).
- This will mark the 65th consecutive month that inflation exceeds the Fed's 2% target.
- Current market pricing indicates a 40% chance of an interest rate hike by the Fed.
Market Implications
The Core PCE report is expected to have significant market implications. A reading of 0.1% or 0.2% m/m would likely ease pressure on the Fed to raise rates immediately, potentially leading to a weaker US dollar and a boost in risk assets. Conversely, a stronger reading of 0.3% or more, especially if accompanied by robust consumer spending, could strengthen the case for a rate hike, thereby supporting the dollar and negatively impacting risk assets.
Technical Analysis of EUR/USD
The EUR/USD currency pair is currently trading above the 1.1660 level, which has shifted from resistance to support. The technical outlook remains positive, with the pair consolidating above the 200-day moving average and a rising trend line from late July lows. A softer-than-expected Core PCE reading could extend the bullish trend, while a hotter reading might challenge this upward momentum.
Conclusion
As the market awaits the Core PCE data, the implications for both the Euro and the US dollar are significant. Traders will be closely monitoring the report for indications of inflation trends and potential shifts in monetary policy from the Fed.
Follow Matt Weller on Twitter: @MWellerFX