Rising US PCE inflation data boosts expectations for a Federal Reserve rate hike in September, pressuring the euro near 13-month lows.
The EUR/USD pair fell to around 1.1365 in early Asian trading Friday, nearing a 13-month low as US inflation data reinforced expectations for Federal Reserve tightening. The May Personal Consumption Expenditures (PCE) Price Index rose 4.1% year-over-year, exceeding April’s 3.3% and marking the first breach of 4.0% in three years.
Core PCE, the Fed’s preferred inflation gauge, climbed 3.4% annually, the highest since October 2023. Markets now price a 63.4% chance of a 25 basis point hike at the Fed’s September meeting, per CME FedWatch. Meanwhile, dovish signals from ECB policymakers, including President Christine Lagarde, weighed on the euro despite a recent 25 basis point rate increase.