US PCE Print Outlook: Key Scenarios for USD Movement
Today’s US Core PCE print at 13:30 UK time will be critical in shaping the near-term outlook for the USD, as it is the Fed’s preferred inflation measure and a key input for December rate decisions.
- Bearish USD Scenario: If Core PCE prints below 0.1% MoM or 2.6% YoY, headline PCE under 2.1%, jobless claims rise above 226K, and GDP comes in below 2.8%, expect a bearish reaction in the USD. This setup would likely fuel USD/JPY selling and broader dollar weakness, particularly as it would support the Fed’s dovish stance.
- Bullish USD Scenario: Conversely, if Core PCE prints above 0.3% MoM or 2.9% YoY, with jobless claims below 226K and GDP exceeding 2.8%, USD buying could accelerate, particularly against EUR/USD, driving it lower. This would align with expectations of resilient inflation and labor markets, reducing the probability of aggressive Fed cuts.
Current Market Sentiment
The USD remains relatively well-supported, even as month-end rebalancing flows pose a temporary risk. According to ING Dollar-based equity investors may shift portfolios given the divergence between the S&P 500 (+5.3% MTD) and weaker European indices like Eurostoxx 50 (-1.36%) and the Nikkei (-1.6%). The meaning is that as the US equity exposures are reduced that results in USD sales to re-allocate into European/Japanese indices. However, DXY should find strong demand around the 106.25/50 range until the US ADP and NFP jobs reports next Wednesday and Friday. Should 106 break, the next major support level would be down at 105.
Despite weak US macro data earlier this week, EUR/USD struggled to rally, with downward pressure also stemming from fears of Trump’s potential tariffs on European carmakers. In the short term, the best chance for EUR/USD movement lies in today’s US inflation data as outlined above.