Euro Steadies Above 1.1650 Ahead of US PCE Data Release

In early Asian trading on Wednesday, EUR/USD was trading near 1.16707, holding roughly flat. The US Treasury's decision to expand its long-dated bond buyback program has put some pressure on the dollar, providing short-term support for the euro. Market sentiment remains cautious overall, with investors awaiting the upcoming US core Personal Consumption Expenditures (PCE) price index to assess the Federal Reserve's policy trajectory.

**PCE Data in Focus, Inflation Expectations Rise**

Market attention is centered on the upcoming US PCE inflation data. According to reports, economists have revised their May PCE month-on-month forecast up to 0.5% from 0.4%, with the year-on-year forecast also raised to 4.1% from 4%. For core PCE, the month-on-month estimate has been revised up to 0.4% from 0.3%, while the year-on-year rate is expected to rise to 3.4% from April's 3.3%. If the data meets or exceeds expectations, it could strengthen bets on Fed policy tightening, thereby influencing dollar movements.

**Dollar Under Short-Term Pressure, Euro Gains Respite**

The US Treasury's decision to expand its long-term bond buyback program has been interpreted by the market as a move aimed at improving bond market liquidity, which has somewhat diminished the dollar's appeal. Meanwhile, the euro benefits from a relative advantage driven by external factors, finding temporary support around the 1.1670 level. However, the eurozone itself still faces challenges such as uneven economic growth momentum, which may limit the euro's rebound strength.

**Market Awaits Clear Signals**

The foreign exchange market currently lacks clear directional guidance, with EUR/USD trading in a narrow range ahead of the key data release. According to the CME FedWatch tool, market expectations for Fed rate hikes this year remain elevated, but some recent analysis suggests that with the US labor market moving toward balance and geopolitical risks easing, the pressure on the Fed to hike rates has actually lessened. Investors will closely watch whether the PCE data can provide a new catalyst for the currency market.