On Friday, one of the Fed's important inflation gauges, the Personal Consumption Price Index, will be released. On Wednesday, Fed official Chris Waller said that the committee members will closely monitor the PCE data.
"Some forecasts predict that core PCE inflation may be revised upward for January and is expected to come in at 0.3 percent in February," he said in his speech.
"Adding this new data to what we saw earlier this year supports the view that there is no rush to lower the policy rate."
He said it is prudent to hold rates at the current restrictive level, "perhaps longer than previously thought," to keep inflation to the Fed's 2% target.
At the last meeting, the Fed stayed on course for three rate cuts this year, which puts upward pressure on EURUSD.
Any surprises related to PCE growth "may well be overlooked by the market after the Fed reaffirmed its intention to cut rates by 25 basis points three times in 2024," said economists at S&P Global Market Intelligence. "This is despite higher-than-expected recent inflation readings."
Investors remain cautiously optimistic about the Fed's outlook for rate cuts, with the timing of the first cut still uncertain.
However, how the markets will react to the latest PCE data will only be clear next week, as the stock market will be closed due to the Good Friday holiday.
In case the index value (month-on-month) is less than 0.2%, it will lead to a sharp short-term strengthening of EURUSD.
The final recommendation is to buy EURUSD provided that the value of the price index of personal consumption expenditures (month-to-month) is less than 0.2%.
Profit should be taken at the level of 1.0920.
A stop-loss should be set at the level of 1.0740.
This content is for informational purposes only and is not intended to be investing advice.
