• EUR/USD eases from daily highs as the US Dollar steadies following the latest batch of US economic data.
• US September PCE data broadly meet expectations, keeping the inflation outlook steady.
• Improving US consumer sentiment and softer hiring signals support the case for a dovish Federal Reserve.

The Euro (EUR) trims earlier gains against the US Dollar (USD) on Friday as the Greenback firms following the latest set of US economic releases. At the time of writing, EUR/USD is trading around 1.1635, easing from the daily high of 1.1628, though the pair remains on track for a second straight weekly gain as markets grow increasingly confident that the Federal Reserve (Fed) will cut interest rates next week.

The delayed US Personal Consumption Expenditures (PCE) report for September kept the overall inflation picture steady. Core PCE, the Fed’s preferred gauge, rose 0.2% MoM, matching expectations, while the annual rate eased to 2.8% from 2.9%. Headline PCE held steady at 0.3% MoM, matching the forecast and remaining unchanged from the previous month. On a yearly basis, the Index came in at 2.8%, in line with expectations and slightly above August’s 2.7%.

Beyond inflation, Personal Income increased 0.4%, beating the 0.3% forecast, while Personal Spending rose 0.3%, matching expectations and easing from August’s 0.5% gain.

The preliminary University of Michigan survey pointed to an improvement in consumer sentiment heading into year-end. The Consumer Sentiment Index rose to 53.3, above the 52 forecast and higher than the earlier reading of 51. The Expectations Index also strengthened, reaching 55, above the 51.2 forecast and rising from 51.

The 1-year inflation outlook fell to 4.1% from 4.5%, while the 5-year measure slipped to 3.2% from 3.4%.

Meanwhile, labour data released earlier this week showed a mixed picture. ADP Employment Change fell 32K in November, sharply missing forecasts, while Challenger Job Cuts dropped to 71.3K and Initial Jobless Claims declined to 191K.

Taken together, the steady inflation readings, easing consumer inflation expectations and softer hiring signals reinforce the case for a dovish Fed stance. According to the CME FedWatch Tool, markets assign about an 87% probability of a 25 basis point rate cut at the December 9-10 monetary policy meeting.