Top USD trades to watch ahead of Core PCE Data release

The Federal Reserve’s preferred inflation gauge, US Core PCE (Personal Consumption Expenditure) Price Index MoM, is released at the end of the coming week. This means some USD trades could present themselves.

But first, a quick recap on why the Core PCE Price Index matters and why it is the Fed’s preferred gauge:

Unlike the more familiar Consumer Price Index (CPI), which uses a fixed basket of goods and services, the Core PCE offers a snapshot of consumer spending with a flexible and broader basket of goods and services that adapts to changes in consumer behavior. Importantly, it excludes volatile food and energy prices though. It is thus argued that the Core PCE provides a clearer view of underlying inflation trends.

Some trading opportunities might exist in the EUR/USD and USD/CAD. The Euro Area’s Inflation Rate (Flash) data is due a few hours before US PCE, while Canada’s GDP Growth data is released at the exact same time as US PCE.