Dollar Holds Near Multi-Month Highs Ahead of PCE Data as Key Currency Pairs Remain in Focus

VG Markets · 2026-06-25T08:33:05Z
Dollar Holds Near Multi-Month Highs Ahead of PCE Data as Key Currency Pairs Remain in Focus

The US Dollar Index (DXY) remained near recent highs on Thursday as investors awaited the release of the US May Personal Consumption Expenditures (PCE) Price Index, one of the Federal Reserve's preferred inflation measures.

Market participants are also monitoring accompanying releases, including Personal Income, Personal Spending, and the final revision of first-quarter US GDP.

According to consensus estimates compiled by FactSet, annual PCE inflation is expected to rise to 4.1%, while core PCE inflation is forecast to remain at 3.3%.

DBS strategist Philip Wee noted that the recent dollar rally could face increased volatility if incoming inflation data differ significantly from market expectations.

According to CME FedWatch data, expectations for additional Federal Reserve tightening have increased compared with a week earlier, contributing to ongoing support for the US Dollar.

EUR/USD Remains Sensitive to ECB Signals

EUR/USD traded near 1.1350 as investors assessed the outlook for European Central Bank policy.

The ECB raised its deposit rate to 2.25% earlier this month and updated its inflation projections for the euro area.

Market participants are also monitoring the latest ECB Economic Bulletin for further guidance on the central bank's policy outlook.

Some analysts believe differences between Federal Reserve and ECB policy expectations continue to influence sentiment toward the currency pair.

USD/JPY Stays Near Recent Highs

USD/JPY remained elevated as investors monitored both interest-rate differentials and comments from Japanese policymakers.

Japanese officials have reiterated their readiness to respond to excessive currency volatility, while Bank of Japan policymakers continue discussing the path toward policy normalization.

However, the interest-rate gap between the United States and Japan remains a key factor supporting the pair.

Market participants continue to monitor levels near recent highs for signs of potential policy responses.

GBP/USD Awaits Further Policy Guidance

GBP/USD traded above 1.3150 as investors balanced domestic developments against broader US Dollar trends.

The Bank of England maintained its policy rate at 3.75% in June while continuing to highlight inflation-related risks.

For now, movements in sterling appear closely linked to shifts in US Dollar sentiment and interest-rate expectations.

AUD/USD Supported by Labour Market Data

AUD/USD remained near 0.6900 following the release of Australian labour market data showing a modest decline in the unemployment rate and an increase in full-time employment.

Despite the supportive employment figures, broader risk sentiment, commodity-price trends, and US monetary policy expectations continue to influence the Australian Dollar.

Market Focus Remains on Inflation Data

The upcoming US PCE report is widely viewed as one of the most important economic releases of the week.

A stronger-than-expected inflation reading could reinforce expectations that US interest rates may remain elevated for longer, while a softer reading may increase volatility across currency markets and prompt investors to reassess the outlook for Federal Reserve policy.

Sources: US Bureau of Economic Analysis (BEA), CME FedWatch Tool, European Central Bank, Bank of England, Reuters, Australian Bureau of Statistics (ABS), FactSet Consensus Estimates.