EUR/USD Near 1.17 Ahead of Core PCE Data

That makes the inflation print more than a routine data point. Core PCE is the Fed’s preferred gauge of underlying price pressures, and another firm reading would strengthen the case for a slower pace of policy easing, keeping U.S. yields supported and the dollar firm. A softer result would do the opposite, reviving bets on deeper cuts and giving the euro room to extend gains.

The macro backdrop is already leaning toward caution. The latest core consumer price data series shows U.S. inflation still running above the Fed’s comfort zone, with the personal consumption expenditures price index forecast to rise 0.62% in July to 132.2116, after a 0.11% decline in June. Core CPI, meanwhile, is expected to edge up 0.21% in August, underscoring that disinflation remains uneven.

That tension is reflected in rate expectations and cross-asset positioning. Adalytica’s hawkish-vs-dovish Fed policy sentiment gauge is in fear territory at 29, down 18 points over the past week, while its forward-guidance snapshot is neutral at 54 but has weakened over the past month. Treasury-linked signals also show investors are still uneasy: the TLT gauge reads extreme fear at 15, suggesting bond traders are braced for more volatility if inflation comes in hot.

For EUR/USD investors, the key issue is whether the Fed’s next move is to cut more aggressively or pause. A hotter core PCE would likely lift the dollar, cap euro upside and keep EUR/USD under pressure near the upper end of its recent range. A cooler print would likely squeeze U.S. yields lower, weaken the greenback and let the euro challenge the 1.18 area again.

The next catalyst is the PCE release itself, with traders also watching Fed commentary for confirmation that inflation is still steering policy rather than growth concerns.