💱 Focus on U.S. PCE Price Index — Inflation Outlook in the Spotlight
Today marks the final trading day of August. The FX market remains directionless as conflicting factors weigh on sentiment.
Dollar-negative factor:
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President Trump’s attempt to dismiss Fed Governor Cook revived doubts over the Fed’s independence, pressuring the dollar lower.
Dollar-positive factor:
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U.S. Q2 GDP (revised) came in at +3.3% (above expectations), supported by consumption, net exports, and business investment.
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Jobless claims also fell, underscoring U.S. economic resilience.
➡️ Despite this, markets still price in about an 85% chance of a 25bp rate cut in September (CME FedWatch).
📊 Key U.S. Data Today
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Personal Income & Spending (July)
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PCE Price Index (July)
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Headline: +2.6% y/y (unchanged)
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Core: +2.9% y/y (prev. +2.8%)
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→ Market reaction hinges on whether stickiness in inflation dominates, or whether rate-cut expectations strengthen.
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Wholesale Inventories (July, advance)
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Chicago PMI (Aug)
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Michigan Consumer Sentiment (final, Aug)
🌍 Europe Developments
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German state CPIs (Aug):
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Bavaria: +2.1%
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NRW: +2.0%
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Saxony: +2.2%
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Baden-Württemberg: +2.5%
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Several states exceeded forecasts → supporting the euro.
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Nationwide German CPI due later today; upside surprise could reinforce EUR strength.
📌 Looking Ahead: U.S. Jobs Data
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Next week’s Nonfarm Payrolls (NFP) is the main event.
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Recall: prior report shocked markets after significant downward revisions, sparking doubts about the data’s credibility.
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Another weak print could cement expectations for three rate cuts by year-end.
✅ Summary
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Today’s PCE report is the key gauge: Will inflation prove sticky or will it accelerate Fed easing bets?
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Dollar likely volatile on the release, but true directional trend waits for next week’s NFP.
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Euro supported by German CPI strength.
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Overall, FX remains a consolidation market, with month-end flows adding volatility risks.
💹 Expected Ranges by Pair
| Pair | Range | Comment |
|---|---|---|
| USD/JPY | 146.00 – 147.80 | PCE-driven. Weak print → risk of break into 145s. |
| EUR/USD | 1.1580 – 1.1740 | Supported by German CPI; weak U.S. PCE could open 1.18 test. |
| GBP/USD | 1.3420 – 1.3560 | UK weakness persists, but strong U.S. data could drive 1.35 rebound. |
| EUR/JPY | 171.00 – 172.80 | EUR strength + yen selling supports highs; break above 172.50 opens further upside. |
| GBP/JPY | 197.50 – 200.00 | 200 remains psychological resistance; tracks USD moves. |
| AUD/JPY | 94.50 – 96.50 | Weighed by soft CPI; <95.00 turns bias bearish. |
| CAD/JPY | 105.80 – 107.80 | Weak CPI + oil slump drag; sustained <106.00 = bearish continuation. |
✅ Takeaways
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USD/JPY: PCE strong = rebound; PCE weak = test into 145s.
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EUR/USD: Supported by German CPI, with upside scope toward 1.18 if U.S. data disappoints.
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GBP/JPY: Key focus on 200 level, but upside capped by UK fiscal/ growth concerns.
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Commodity FX (AUD, CAD, ZAR): Direction largely dependent on external factors (oil, China, U.S. yields).
