The primary currency pair strengthened its position on Monday. The current EURUSD exchange rate stands at 1.0852.
The currency market started the week cautiously, with the US dollar slightly declining and other currencies somewhat strengthening. This development is a reaction to Friday’s release of the US core PCE inflation. The report indicated a stabilisation of US inflation, creating the basis for a future reduction in borrowing costs.
As expected, the personal consumption expenditures price index increased by the same 2.7% y/y. Monthly data also matched forecasts. There were no changes in the released data.
The inflationary component confirms that price pressure remains above the Federal Reserve’s target of 2%, indicating the necessity for caution in more than one interest rate hike.
The dollar fell for the first time this year in May, a shift attributed to the market’s evolving expectations regarding the timing and method of the regulator’s interest rate reduction. According to the CME FedWatch monitor, the market now anticipates a 37-basis point cut by the end of 2024, with the likelihood of a rate reduction in September estimated at 53% against 49% before the report release.