Skip to content
PCE inflation data ahead

EUR/USD Struggles Amidst ECB’s Dovish Stance and Anticipation of U.S. PCE Inflation Data

The EUR/USD pair is currently operating under 1.0550, unable to fully leverage its bounce back from the previous day. This comes amidst a somewhat weak U.S. dollar and a positive market sentiment. The pair’s performance has been influenced by the perceived dovishness of the European Central Bank (ECB). Despite better than expected U.S. growth data, the U.S. dollar remained unaffected.

EUR/USD Daily Chart

Lowest point at 1.0521
Previous week’s lows equaled
Impacted by dovish ECB expectations

The ECB held its policy steady on Thursday, marking the first pause since mid-2022. With inflation slowing down and the Eurozone economy approaching recession, the 4.00% deposit rate is seen as the terminal rate for now. Despite high inflation, the ECB reiterated that rates will remain high for as long as necessary. This led to further weakening of the Euro.

Key ECB Decisions

ECB DecisionsImpact
Kept policy unchangedFirst pause since mid-2022
Deposit rate maintained at 4.00%Seen as terminal rate
High inflation acknowledgedRates to remain high

The U.S. economy saw an expansion at an annual rate of 4.9% during Q3, beating the 4.2% expectation. However, the Core Personal Consumption Expenditure (PCE) rose by 2.4%, slower than the expected 2.5% and significantly lower than Q2’s 3.7%. Despite this, the U.S. economy remains strong.

U.S. Economic Indicators

Economic IndicatorQ3 PerformanceExpectation
Annual GDP growth rate4.9%4.2%
Core PCE2.4%2.5%

USD/JPY Performance

The USD/JPY pair is also experiencing some downward pressure, breaking its three-day streak of gains. The pair had reached its highest level since October 2022, at around the 150.75-150.80 region. Despite this, it remains above the 150.00 mark as traders await the U.S. PCE Price Index.

USD/JPY Daily Chart

Ended three-day winning streak
Reached highest level since Oct 2022
Remains above 150.00 mark

In Japan, Tokyo’s consumer prices excluding fresh food rose by 2.7%, driven by a rise in hotel and accommodation costs and a reduction in electricity subsidies. This increase suggests that businesses are passing costs on to consumers more than expected.

Tokyo Consumer Prices

Consumer Prices (excluding fresh food)Rate of Increase
Hotel and accommodation costs43%
Consumer prices excluding fresh food and energy3.8%

The Bank of Japan (BOJ) is expected to revise its price outlooks for this year and next, given these strong figures. Speculation continues about a change to the BOJ’s yield curve control program, following a further slide in the yen and a rise in long-term yields.

Anticipated Rise in Core PCE Price Index and Potential Impact on the Market

The Core Personal Consumption Expenditures (PCE) Price Index, a favored inflation gauge of the US Federal Reserve (Fed), is scheduled for release by the US Bureau of Economic Analysis (BEA) at 12:30 GMT.

What to Watch from the Upcoming PCE Inflation Report?

The Core PCE Price Index, which excludes the volatile food and energy sectors, is projected to increase by 0.3% month-on-month in September, a more significant rise compared to the 0.1% increase observed in August. The annual Core PCE Price Index is anticipated to ascend by 3.7%, representing a slowdown from August’s 3.9% growth.

The headline PCE Price Index for September is expected to demonstrate a monthly growth of 0.3%, while the yearly PCE inflation is predicted to slightly decrease to 3.4% from August’s 3.5%.

In contrast, the real Gross Domestic Product of the United States grew at an annualized rate of 4.9% in Q3, as reported by the BEA on Thursday. The publication’s details revealed that Q3’s PCE inflation escalated to 2.9% from Q2’s 2.5%, whereas the Core PCE inflation dipped to 2.4% from 3.7% in the previous quarter.

Fed Chairman’s Remarks on Inflation

In early October, Federal Reserve Chairman Jerome Powell addressed the Economic Club of New York, stating that the lower inflation readings over the summer were favorable. However, he remarked that the Consumer Price Index (CPI) figures for September were “somewhat less encouraging.”

Timing of the PCE Inflation Release and Its Potential Effect on EUR/USD

The PCE inflation report is slated for release at 12:30 GMT. Considering that markets have already had a preview of the PCE figures in the Q3 GDP report, the market reaction is expected to be relatively subdued.

According to the Fed’s latest Summary of Projections released in September, policymakers deemed another rate hike appropriate before year-end. However, CME Group’s FedWatch Tool indicates that investors assign a probability of over 70% that the Fed will maintain the interest rate steady in 2023.

It is unlikely that the forthcoming September PCE inflation report will significantly shift market positioning. Up until the Fed’s policy meeting in December, investors will have access to the CPI inflation and employment data for October and November to ascertain whether the Fed’s tightening cycle has concluded.


All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.


  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.