EUR/USD Pressured After Mixed US PCE Data

EUR/USD traded slightly lower on Wednesday after the release of mixed US Personal Consumption Expenditures (PCE) price index data. Headline inflation came in above expectations, providing support for the dollar, while the core reading matched forecasts, limiting the downside for the pair. At the time of writing, EUR/USD was trading around 1.16583, maintaining a weak consolidation pattern.

**Mixed Inflation Data Gives Dollar a Temporary Boost**

The latest data showed US headline PCE inflation rose more than expected, reinforcing the case for the Federal Reserve to maintain its hawkish stance in the near term, which lent support to the dollar. However, the core PCE reading, which the Fed views as more critical, matched market expectations. This helped ease concerns about accelerating inflation and capped further dollar gains, preventing a sharp decline in EUR/USD.

**Contrasting Policy Outlooks Between Europe and the US Weigh on Euro**

Weak economic data from the eurozone has significantly cooled market expectations for further aggressive rate hikes by the European Central Bank. Analysts noted that sluggish eurozone economic growth, combined with the possibility of the ECB pivoting toward a dovish stance and pausing rate increases, stands in stark contrast to the resilience of the US economy. This divergence in policy outlooks continues to keep EUR/USD under pressure. Market participants are now closely watching the upcoming eurozone HICP inflation preliminary readings for more clues on the ECB's future policy path.

**Markets Focus on Upcoming Data and Official Remarks**

With political uncertainties such as the French election and key inflation data from both sides of the Atlantic on the horizon, FX market sentiment has turned cautious. Attention is now shifting to speeches from several Federal Reserve officials, as any further hints on inflation or the trajectory of interest rates could trigger short-term volatility in EUR/USD. Overall, unless the divergence in economic and policy outlooks between the US and Europe becomes clearer, EUR/USD may struggle to break out of its current range on a structural basis.