EUR/USD Plummets to 1.1650 Amid Surprise PCE Inflation Reading

The US Personal Consumption Expenditures (PCE) Price Index inflation reading surprised markets by coming in slightly above expectations at 3.7% year-over-year in July, unchanged from the previous month and above consensus at 3.6%. This triggered a hawkish market reaction, pushing US rates higher and weighing on EUR/USD.

The pair dropped to 1.1650 as the US Dollar found support from stronger data. Markets also increased pricing for a potential September Fed rate hike, reinforcing downside pressure on EUR/USD.

According to Danske Bank's research team, the USD found support in somewhat stronger-than-expected PCE inflation reading. The team notes that markets reacted hawkishly to the print, with rates moving higher across both the short and long ends of the curve, while EUR/USD moved lower.