EUR/USD Rate Vulnerable to Further Losses on Sticky U.S. Core PCE

Updates to the U.S. Core Personal Consumption Expenditure (PCE) may keep the EUR/USD exchange rate under pressure as the Federal Reserve’s preferred gauge for inflation is anticipated to hold steady at 1.9% per annum for the third consecutive month in January.

Signs of sticky price growth may heighten the appeal of the U.S. dollar as it puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy, and the central bank may keep the door open to implement a rate-hike in 2019 as Chairman Jerome Powell and Co. project a longer-run interest rate of 2.50% to 2.75%.

In turn, a 1.9% print or higher may spark a bullish reaction in the greenback, but an unexpected downtick in the core PCE may curb the recent decline in EUR/USD as it encourages the FOMC to abandon the hiking-cycle.

Fresh data prints coming out of the U.S. economy showed the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, holding steady at 1.9% per annum for the second consecutive month in December. At the same time, the measure for Personal Spending slipped 0.5% amid forecasts for a 0.3% decline, while the index for Personal Income slipped 0.1% in January after rising 1.0% during the last month of 2018.

The U.S. dollar faced a lackluster reaction following the mixed data prints, with EUR/USD struggling to hold above the 1.1400 handle as the exchange rate closed the day at 1.1363./dailyfx.com

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