EUR/USD holds steady as US PCE softens, trade tensions offset USD weakness
The Euro (EUR) remains steady against the US Dollar (USD) on Friday after a softer-than-expected US Personal Consumption Expenditures (PCE) Price Index, which was close to the Federal Reserve’s (Fed) 2% goal, lifted the pair from daily lows of 1.1312. EUR/USD is trading at 1.1361, virtually unchanged on the day.
Market mood remains fragile, shifted between optimism and pessimism, keeping US equities pressured due to tariffs and trade news. The US Court of International Trade ruled that tariffs were illegal and ordered Washington to lift them within ten days. Nevertheless, the Trump administration appealed the decision in a Federal Court, which reinstated most of the duties imposed on April 2 “Liberation Day.”
President Donald Trump sparked a shift in sentiment after stating that China is not committed to fulfilling the terms of the Switzerland trade agreement. However, he said that he would speak with Chinese President Xi Jinping to expedite negotiations between Washington and Beijing.
Besides trade policy, the passage of Trump’s “Big Beautiful Bill,” expected to add trillions of Dollars to an already high fiscal deficit, keeps traders leaning on assets outside the US in the so-called “Sell America” trade.
Data-wise, the US schedule revealed that PCE figures are moving in the right direction, but not so the core PCE inflation, which remained stalled in the midpoint between the 2% and 3% range. Meanwhile, an improvement in Consumer Sentiment, as revealed by the University of Michigan (UoM), suggests that American households are shifting slightly optimistic about the economy despite forecasting a jump in inflation.
Across the pond, German Retail Sales plunged on a monthly basis. Inflation in Germany and Spain remains within the confines of the European Central Bank's (ECB) 2% goal, which could increase the chances of an ECB rate cut at the June 5 meeting.
Source : Fxstreet
