23.09.202512:29 Forex Analysis & Reviews: PCE Data May Significantly Impact Dollar Dynamics by the Weekend (Potential Continuation of Bitcoin and AUD/USD Declines)

The US dollar continues to consolidate above the 97.00 level on the PCE Index, clearly in anticipation of the release of key inflation data expected at the end of this week. We're talking, of course, about the Personal Consumption Expenditures (PCE) Price Index report, which will first be released on Thursday in quarterly terms, followed by the year-over-year and month-over-month figures on Friday. Also on Friday, notable data on personal income and spending will be published.

It is in anticipation of these reports that the US dollar is consolidating in the Forex market.

Why Are These Data Important?

Primarily because they will help market participants understand what is happening with inflation and how the Federal Reserve might act in the near future—whether it will continue cutting interest rates or not. Historically, the Fed has significantly based its rate decisions not so much on traditional inflation reports, particularly consumer inflation, but rather on the PCE index. This indicator is expected to show a quarterly growth rate holding steady at 2.0%, with the core reading slightly higher at 2.5%.

Meanwhile, the year-over-year PCE Price Index is forecast to rise to 2.8%, up from 2.6% in the previous period. However, the consensus forecast points to a more modest increase to 2.7%. On a monthly basis, the indicator is expected to rise from 0.2% in July to 0.3% in August—matching market expectations. Core monthly PCE is anticipated to remain stable at 0.3%, although the consensus sees a possible decline to 0.2%. On a year-over-year basis, a rise to 3.0% is expected, up from 2.9%, although the market forecasts it holding at 2.9%.

Now, let's review the data on personal income and spending, where a general decline is expected.

So, the market awaits the release of these reports to determine one critical outcome: Will the PCE indicator rise or not? The answer could significantly impact overall market sentiment and lead to either a decline in the dollar or a modest rise.

If the PCE figures come in line with expectations—or show even a slight decline—then, given the strong pressure from the US administration and President Trump for deeper rate cuts, the market may strongly lean toward expecting further Fed rate reductions. In this scenario, the dollar would undoubtedly come under pressure and could fall to 97.00 on the index, and potentially to 96.50. However, considering the overall economic weakness of countries whose currencies are in the dollar basket, this decline would likely be limited, as dollar-denominated assets remain highly attractive.

There is also an alternative scenario: if the PCE indicator unexpectedly comes in above forecasts, this could lift the dollar as expectations for another Fed rate cut pause return.

Only time will reveal which scenario plays out. For now, my overall market outlook remains moderately positive—especially for equity markets.

Forecast of the Day:

Bitcoin

The possibility of a surprise in the upcoming PCE reports is exerting downward pressure on crypto market instruments. Against this backdrop, the token is declining and is trading below the resistance level of 113,361.50. If this level holds, it may lead to a reversal and a drop toward the 110,788.60 level. A potential sell level may be around 112,234.00.

AUD/USD

The pair is trading above the 0.6580 level. A drop below this mark could trigger a renewed decline toward 0.6500. The 0.6575 level could serve as a potential sell trigger for the pair.