USD weakens as April PCE inflation data expected to show cooling

The US Dollar Index has slipped 0.2% ahead of today's 12:30 GMT release of April PCE price index data, the Federal Reserve's preferred inflation gauge. Markets are positioning for another month of cooling inflation, with professional forecasters expecting the headline PCE to rise 0.3% month-over-month and core PCE to increase 0.2-0.3%. The anticipated data follows recent CPI and PPI readings that suggest moderating price pressures. A softer-than-expected reading could reinforce market expectations for Fed rate cuts later this year, potentially pushing the dollar lower against major currencies. Technical indicators show the DXY testing support at 104.50, with a break below potentially accelerating losses toward 104.00. Conversely, any upside surprise in inflation could trigger dollar strength as traders reassess the Fed's policy trajectory. Currency pairs to watch include EUR/USD, currently testing resistance at 1.0850, and USD/JPY hovering near 157.00.