- EUR/USD faces an intense sell-off and extends its downside to near 1.0830 as the US Dollar (USD) advances. The US Dollar moves higher amid risk aversion that Donald Trump will come victorious in the United States (US) presidential elections in November and the uncertainty ahead of the Personal Consumption Expenditures Price Index (PCE) data for June, which will be published on Friday.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh weekly high at around 104.50. Expectations for Trump's return to power rose after an assassination attack on him. Meanwhile, Democrats have nominated Vice President Kamala Harris as leader to fight against Republicans.
- On the economic front, investors will keenly focus on the US core PCE inflation data as it would provide fresh cues about when the Federal Reserve (Fed) will start reducing interest rates. The report is expected to show that core PCE inflation, the Fed’s preferred inflation measure, decelerated to 2.5% from May’s figure of 2.6%, with monthly figure growing steadily by 0.1%.
- The scenario in which price pressures decline expectedly or at a faster pace will boost expectations of early rate cuts by the Fed. On the contrary, stubborn figures would weaken rate-cut bets. According to the CME FedWatch tool, 30-day Federal Fund futures show the central bank will begin lowering its key borrowing rates from their current levels in the September meeting.
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