EUR/USD Holds Steady Above 1.1660 Following US PCE Inflation Data
By Vishal Chaturvedi | August 29, 2025, 13:21 GMT
The EUR/USD currency pair stabilized above the 1.1660 level on Friday, demonstrating resilience after the latest US Personal Consumption Expenditures (PCE) inflation data aligned closely with market expectations. The Euro faced initial selling pressure but managed to steady as investors digested the implications of the July inflation report.
US PCE Data Reflects Expected Inflation Trends
According to the US Bureau of Economic Analysis, the core PCE Price Index, a key inflation gauge closely monitored by the Federal Reserve, increased by 0.3% month-over-month in July, precisely matching economists’ forecasts and mirroring June’s pace. On an annual basis, the core inflation measure edged up to 2.9% from 2.8%, marking its highest reading since February this year.
The broader headline PCE Price Index rose 0.2% month-over-month in July, again in line with projections, though slightly softer than June’s 0.3% increase. The annual headline rate held steady at 2.6%, suggesting inflation pressures remain elevated but stable.
Strong Consumer Spending Supports Economic Outlook
The July report also revealed robust personal spending figures. Consumer expenditures jumped 0.5%, outperforming expectations of a 0.3% increase and accelerating from June’s 0.3% rise. Personal income grew by 0.4% month-over-month, matching forecasts and strengthening from the prior 0.3% gain. These numbers indicate continued household demand strength, bolstering support for economic growth despite persistent inflation.
Market Reaction and Currency Movements
Despite ongoing inflation concerns and healthy consumer activity, the US Dollar’s response was relatively muted. The US Dollar Index reclaimed ground near 98.00, providing support to the currency, while the EUR/USD consolidated around 1.1660. The single currency remains under mild pressure as the resilient US spending data underpin the Greenback. However, over August, the EUR/USD has booked gains approaching 2%, signaling broader underlying weakness in the US Dollar.
Federal Reserve’s Delicate Balancing Act
The latest PCE figures shed light on the Federal Reserve’s challenging task ahead. Core inflation remains elevated above the Fed’s 2% target, driven in part by tariffs and services sector price pressures. Nevertheless, slowing hiring momentum signals a softening economic environment.
This mixed economic backdrop keeps alive market expectations for a 25 basis point rate cut in the Fed’s September policy meeting. The possibility of easing monetary policy seems to be capping the US Dollar’s near-term gains and supporting the Euro.
Euro Performance Against Major Currencies
In today’s currency heat map, the Euro demonstrated relative strength against the British Pound, reinforcing its status as a key player in the foreign exchange market. The Euro experienced varied performance against other major currencies, reflecting the complex dynamics in global forex markets driven by economic data releases and central bank policy outlooks.
Note to Investors:
This article is for informational purposes only and does not constitute investment advice. Readers are urged to conduct their own research and consult financial professionals before making any trading decisions. Currency markets are subject to volatility and risk, including the potential loss of principal.
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