EURUSD fell further as the US dollar surged after Fed Chairman Powell put back expectations for March rate cuts.
The EURUSD pair fell for the second day in a row, reaching close to 1.0790 during Thursday’s European session. The US Dollar (USD) strengthens versus the Euro (EUR). Boosted by Federal Reserve (Fed) Chair Jerome Powell’s rejection of a rate cut at the next March meeting. Powell’s remarks have also boosted US Treasury yields.
The Euro was challenged by heightened expectations of an ECB interest rate cut in June, following lower-than-expected German inflation numbers.
The euro encountered problems as a result of Germany’s lower preliminary Consumer Price Index (CPI) data issued on Wednesday. This has raised market expectations of a rate decrease by the European Central Bank (ECB) in June. However, earlier this week, ECB Vice President Luis de Guindos stated. That interest rate decreases will be considered only if there is confidence that inflation will remain within the central bank’s 2% target.
Eurozone inflation and US ISM Manufacturing PMI data may influence the pair’s next moves.
The German Consumer Price Index (CPI) for January rose 2.9% year on year. Less than the predicted 3.3% increase from December’s figure of 3.7%. Meanwhile, consumer inflation rose to 0.2% from 0.1% the previous month, meeting expectations. The Harmonized Index of Consumer Prices climbed 3.1% year on year. A decrease from the prior number of 3.8%. The Inflation Report at the entire Eurozone, the release is set at 10:00 GMT.
The US Dollar Index (DXY) continues to strengthen as market expectations for the Federal Reserve’s (Fed) upcoming decisions, including the May meeting, grow. According to CME’s FedWatch Tool, there is a more than 60% chance that the Fed will keep interest rates between 5.25% and 5.50% during its March meeting. Meanwhile, the probability of a quarter-point rate drop in May is greater than 60%.
The US ADP Employment Change report showed a 107K job increase in January, falling short of the predicted 145K and a decline from the prior reading of 158K in December. On Thursday, the spotlight is expected to be on major economic statistics such as US Initial Jobless Claims, Nonfarm Productivity and ISM Manufacturing PMI.
Daily Market movers: EURUSD falls amid lower German inflation numbers.
Germany’s yearly retail sales declined 1.7% in December, less than the 2.4% decrease witnessed in November.
The German Harmonized Index of Consumer Prices (MoM) fell by 0.2%, exceeding market expectations of a 0.1% drop.
According to the German Statistics Office, Unemployment Change decreased by 2K in January, compared to an expected increase of 11K. The seasonally adjusted unemployment rate dropped to 5.8%, while markets expected it to remain at 5.9%.
The US Employment Cost Index (ECI), as reported by the US Bureau of Labor Statistics, decreased to 0.9% in the fourth quarter, down from 1.1% the previous quarter.
The Chicago Purchasing Managers’ Index dropped to 46 in January. The market expected an increase to 48 from 47.2 previously.
