Mixed US Inflation Data Weighs on Euro Amid Fed Rate Expectations

The EUR/USD pair is trading under modest pressure on Wednesday after the release of mixed US PCE data. The Personal Consumption Expenditures (PCE) Price Index showed a headline inflation rate above expectations, supporting the US Dollar (USD). However, an in-line core reading limited the market reaction.

The headline PCE Price Index rose 0.2% month-over-month (MoM) in July, exceeding the 0.1% forecast and reversing the 0.1% decline recorded in June. On an annual basis, headline inflation remained steady at 3.7%, above the 3.6% forecast.

The core PCE Price Index, the Federal Reserve's (Fed) preferred measure of underlying inflation, increased 0.2% MoM, matching market expectations but accelerating from June's 0.1% rise. Annual core inflation held steady at 3.3%, in line with forecasts.

The data follows relatively moderate July Consumer Price Index (CPI) and Producer Price Index (PPI) figures. The report did little to alter expectations for the Fed's upcoming meeting, with the CME FedWatch Tool showing a roughly 65% chance that the central bank will leave interest rates unchanged in September.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 99.07 at the time of writing. The index gains ground after the release but stays close to its recent lows following last week's sell-off triggered by the US Treasury's surprise announcement.