European FX Open - Focus shifts to key US PCE data

Risk-off sentiment which has captured price action for much of the week has taken a slight breather as focus shifts to today's key US PCE data, with the likes of AUD/USD arresting a nine-day losing streak as local exporters hedge out of US greenback receipts.

The Aussie was boosted separately as iron ore rose on speculation China's string of policy support measures will boost demand for the steelmaking material, while the Scandies have edged off their yearly lows as light USD/ccy profit taking ensues.

Overnight, USD/YEN rebounded off yesterday's 151.94 low to reclaim 154.00 at one point on fix-related demand, though gains paused after data revealed inflation in Tokyo accelerated for a third month in July, keeping bets alive on an interest rate hike from the BOJ at its meeting next week. Fast money types were spotted selling above 154.00.

Focus now shifts to today's key US inflation data.

Recall yesterday, data revealed US durable goods fell significantly, though the first look at US GDP showed growth of 2.8% q/q in Q2 vs the 2.0% forecast and from 1.4% last. The core PCE Price Index also rose more than forecast at 2.9% vs the 2.7% estimate, though this was nicely below the 3.7% prior read, while the 2.3% rise in the GDP Price Index was less than the 2.6% estimate and much cooler from 3.1% last.

Today, the US PCE inflation reading for June is widely expected to continue easing further to +2.4% y/y, a low not seen since Feb '21. The core measure should also continue cooling, along with the wider trend (cooling labour market, falling inflation) seen lately. All up, the report should offer encouraging news to the Fed, and open the doors to a rate cut at the September meeting.

Also today, the results of the UMich survey of consumers in June should largely remain unchanged from its flash estimates, with the 1-year ahead inflation staying at 2.9%.

US Jun Personal Income and Personal Spending is also due.

In Europe, ECB 1 and 3 Year CPI Expectations will be keenly eyed.

Data includes French and Italy Jul sentiment reads, and Spain's 2Q Unemployment Rate and Jun Retail Sales.

Sweden gets the Jun Unemployment Rate and Jun Trade Balance, while retail sales feature in Norway.

There is no central bank speak of note.

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