USD Weakens as Markets Await Crucial PCE Inflation Data

The US Dollar has come under pressure across major pairs as traders position ahead of Friday's critical PCE inflation release, the Federal Reserve's preferred inflation gauge. USD/JPY has declined 0.5% to 143.20, while EUR/USD gained 0.3% to 1.0630 as markets reassess the Fed's rate cut trajectory. Current market pricing shows reduced expectations for aggressive Fed easing, with only 50 basis points of cuts priced in through year-end, down from 75 basis points last week. The upcoming PCE data will be pivotal in determining whether the Fed maintains its current pace of monetary policy normalization. Analysts expect core PCE to show a 0.2% monthly increase, which would keep annual inflation at 2.6%. Technical indicators suggest USD/JPY faces strong resistance at 144.50, while support emerges at 142.80. A softer-than-expected PCE reading could accelerate dollar weakness and reignite rate cut speculation.