The EUR/USD pair has settled within the 13 figure and is testing the support level of 1.1330 for the second consecutive day, which corresponds to the lower Bollinger Bands line on the H4 timeframe. Trader focus remains on the Federal Reserve's monetary policy in light of the hawkish results from the June meeting. The central bank maintained all monetary policy parameters, but emphasized the importance of restoring price stability in the U.S.

This is why the data released on Thursday on the growth of the core PCE index and U.S. GDP are so important to the American currency. Essentially, these releases have become another ace in the hands of dollar bulls, as they clearly indicate that inflationary pressure in the United States not only persists but is gradually increasing.

The core Personal Consumption Expenditures (PCE) index, a key inflation gauge for the Fed, rose by 3.4% year-on-year in May. This indicator demonstrates a consistent upward trend for the third consecutive month: it increased by 3.0% in February, 3.2% in March, and 3.3% in April. The May result of 3.4% is the highest level of core inflation since the end of 2023. The overall PCE index, which largely depends on fluctuations in energy prices, showed a more significant increase to 4.1% (up from 3.8%). However, traders are primarily focused on the core figure rising, indicating increasing inflationary pressure across a broader range of goods and services.

For the Fed, the report serves as a concerning signal, heightening worries about persistent inflationary pressure. With an inflation target of 2%, this figure remains nearly double the target, and its continued acceleration casts doubt on the possibility of easing monetary policy anytime soon. Moreover, the ongoing upward trend in core inflation will likely intensify the already loud discussions within the Fed about the need to raise interest rates—or at least to maintain the current rate for longer.

In other words, the May report on the growth of the core PCE index has provided significant confirmation that the process of returning inflation to target levels has noticeably slowed. As a result, hawkish expectations have strengthened: according to CME FedWatch data, traders currently assess the probability of a 25-basis-point Fed rate increase at the September meeting at 65%, whereas just a week ago this possibility was rated at only 30%.

The released data about U.S. economic growth also supports the dollar. The final estimate of U.S. GDP growth for the first quarter came in significantly stronger than expected, with the economy growing by 2.1% year-on-year, up from the previous estimate of 1.6%. However, in the context of the dollar's prospects, the crucial aspect is not just the GDP figure but also its price components and growth structure.

First, the report confirmed the persistence of heightened inflation pressure in the economy. Even in the second estimate, the quarterly personal consumption expenditures index was recorded at 4.5% (while the core PCE index stood at 4.4%)—more than double the Fed's target level. This result only heightens concerns that price pressure is persistent rather than temporary (especially amid the aforementioned report on the rise in the core PCE index for May).

Second, attention should be paid to the dynamics of nominal GDP. If real GDP rose by 2.1%, then nominal economic output increased significantly faster, indicating that rising prices substantially contributed to the overall economic result. Furthermore, the report confirmed the ongoing high level of business investment activity—especially highlighted by growth in investments in equipment and information technology (related to AI and digital infrastructure). Strong corporate demand for equipment, software, and computational power can maintain high capacity utilization, intensifying price pressure in relevant sectors of the economy.

Another potentially inflationary factor is related to government spending. In the first quarter, federal expenditures rose significantly after a weak fourth quarter last year (due to the shutdown). Against a backdrop of already high inflation, this additional "budget stimulus" will further complicate efforts to return price growth to target levels.

In summary, the reports released on Thursday reflect a "hawkish combination": the economy is growing faster than expected, and inflation is accelerating again. Such a scenario enables the Fed not only to keep interest rates at the current level but also to discuss tightening monetary policy in the second half of the year if inflationary pressures continue to intensify in the second and third quarters.

Thus, on Thursday, the dollar has benefited from macroeconomic data, including strong U.S. GDP growth and core PCE index readings. However, sellers have not been able to break the support level of 1.1330 (the lower line of the Bollinger Bands on the four-hour chart), after which bulls managed to organize a corrective pullback. It is advisable to enter short positions only after the bears break through this price barrier, clearing the way to the 12-figure area.