Euro bounces after weak US inflation figures

EUR/USD rises to 1.0720 in Friday’s American session after the United States (US) core Personal Consumption Expenditure price index (PCE) data showed that price pressures declined expectedly in May. On a monthly and an annual basis, the US core PCE report grew at a slower pace of 0.1% and 2.6%, respectively. The expected decline in the underlying inflation data will positively influence market speculation on the Federal Reserve (Fed) reducing interest rates from the September meeting, according to the CME FedWatch tool, which also shows that there will be two rate cuts this year. Contrary to market expectations, Fed officials see only one rate cut this year as signaled in the latest dot plot. 

On Thursday, Atlanta Fed Bank President Raphael Bostic said rate cuts would become appropriate when they are convinced that inflation is on a clear path towards 2%. When asked about a concrete timeframe for rate cuts, Bostic said "I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year," Reuters reported. 

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, falls to 105.80. 10-year US Treasury yields decline to 4.27%. Going forward, the major trigger for the US Dollar (USD) will be the US ISM Manufacturing Purchasing Managers' Index (PMI) data for June, which will be published on Monday. The data will indicate the current health of the manufacturing sector.