US data could determine euro's next move

On Wednesday, August 26, the EUR/USD pair is trading in a range of 1.1660-1.1669 dollars – slightly above yesterday's levels. All investor attention is focused on the release of key US economic indicators, which will take place today at 15:30 Kyiv time (8:30 New York time).

The main event of the day will be the publication of the second estimate of US GDP for the second quarter, data on durable goods orders, and PCE indicators — the Fed's preferred inflation gauge. All these data are released simultaneously.

The market will pay special attention to the core PCE index. According to preliminary expectations, its growth in July should be about 0.2% month-on-month, while the annual core inflation rate may remain around 3.3%. Expectations for durable goods orders are at +0.4%, while US GDP growth in the second quarter was previously estimated at 1.5% annualized.

For the euro, the most important thing will be the signal that the statistics give regarding the further actions of the Federal Reserve. Weaker economic indicators and moderate inflation could strengthen expectations of interest rate cuts in the US. In that case, US bond yields may decline, and the dollar will come under pressure — this will create conditions for EUR/USD growth.

If inflation turns out to be above forecasts and economic activity more resilient than expected, the market may again reduce bets on an imminent Fed policy easing. Then the advantage will be on the dollar's side, and the euro risks falling below current levels. An additional factor for the currency market remains yesterday's statistics. The US consumer confidence index fell to 89.4 points from a revised 90.2 points, reaching a seven-month low. Americans' expectations regarding the economic situation and the labor market deteriorated especially noticeably.

Thus, today could be quite important for EUR/USD. Weak US statistics could bring the euro back to growth and push the pair above 1.17, while strong indicators, especially on inflation, could support the dollar. At the same time, the final direction of the market movement will depend not on one indicator, but on the combination of data and the subsequent reaction of US Treasury yields.