The EUR/USD pair held firm above 1.0850 on Tuesday, benefiting from a weaker US dollar as investors adopted a cautious stance ahead of the upcoming US Personal Consumption Expenditures (PCE) data. This resilience in the euro comes amid expectations that the PCE report, a closely-watched inflation gauge for the Federal Reserve, could offer insight into the Fed’s future policy direction.
As the dollar softened, the euro found support, with investors speculating that a dovish Fed approach might be on the horizon if the PCE data shows signs of easing inflation. Market participants are closely watching for any indication that inflationary pressures in the US could be receding, potentially prompting a less aggressive rate trajectory from the Fed and offering further support for EUR/USD.
Should the PCE data reveal sustained inflation, however, the dollar could regain strength, pressuring EUR/USD back toward support levels. For now, the euro maintains its position, with traders poised for a decisive move following the release of this key economic indicator.
