29 July 2024, EUR/USD
EURUSD:
The Euro-dollar pair is trading slightly higher near 1.0860 at the start of the Asian trading session on Monday. The major pair is rising as traders widely expect a September interest rate cut by the US Federal Reserve (Fed), dragging the dollar down.
US inflation, as measured by the change in the personal consumption expenditure (PCE) price index, fell slightly in June from a year ago, paving the way for a Fed interest rate cut in September. U.S. PCE inflation continued to slow in June, from a 2.6% annualized gain in May to 2.5% in June. On a monthly basis, PCE rose 0.1% in June, after remaining unchanged in May. The core PCE price index, the Fed's preferred measure of annual inflation, rose 2.6% year-over-year in June, up from 2.5% in May, according to Commerce Department data released Friday.
Still, the decline in U.S. inflation in June is not enough for the Fed to start cutting interest rates at its August meeting on Wednesday. Morgan Stanley analysts noted that “significant progress on inflation” will allow the Fed to move closer to cutting rates, adding that they expect three rate cuts this year, starting with the September FOMC meeting. According to the CME FedWatch Tool, financial markets have priced in a nearly 90% probability of a Fed rate cut in September, followed by another cut in November and December.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
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