EURUSD recovers somewhat, as the US Dollar’s surge pauses as the US CPI comes under scrutiny.
On Tuesday, the EURUSD edged higher amid a minor drop in the US Dollar (USD). The Euro’s (EUR) prognosis remains bleak, with the majority of European Central Bank (ECB) officials emphasizing the need to lower interest rates further in response to a dramatic slowdown in Eurozone pricing pressures and lackluster economic growth.
ECB policymakers are open to further rate reduction.
In an interview with Table Media, ECB policymaker and Bundesbank President Joachim Nagel stated, “I am certainly open to Consider whether we could undertake another interest rate decrease.” Nagel has also agreed to revise the Eurozone’s GDP forecast for 2024 to a 0.2% decrease, down from a previous projection of 0.3% growth.
However, German industrial production in August exceeded expectations. On a monthly basis, Industrial Production increased at a strong rate of 2.9%, contrary to expectations of 0.8%, after declining by 2.4% in July.
Meanwhile, ECB policymaker and Austrian central bank Governor Robert Holzmann advocated prudence on future interest rate decreases because inflation has yet to be conquered, according to an interview with Sueddeutsche Zeitung published on Monday. In September, the Eurozone flash Harmonized Index of Consumer Prices (HICP) slowed. 1.8% year on year.
Daily digest market movers: EURUSD advances as the US Dollar corrects somewhat.
In Tuesday’s European session, the EURUSD rose around the psychological barrier level of 1.1000. The major currency pair recover somewhat. As the US Dollar suffers a minor correction. With investors diverting their attention to the September Consumer Price Index (CPI) data. Which will be release on Thursday.
The inflation report is expected to indicate that the annual core CPI. Which excludes volatile food and energy costs climbed. At a consistent rate of 3.2% year on year (YoY). The headline inflation rate expected to have slowed to 2.3% YoY from 2.5% in August.
The Fed is likely to decrease interest rates by 25 basis points in November.
The impact of the inflation statistics is likely to be lower on the Federal Reserve’s (Fed) interest rates policymakers are increasingly focused on boosting economic growth and consumer spending. Fed Governor Adriana Kugler’s comments during Tuesday’s European session indicated. That the policymaker believes future rate reduction are appropriate if price pressures continue to fall as predicted.
However, the US Dollar’s outlook remains robust. With financial market players expecting the Fed to lower interest rates again in November. But the rate decrease will be 25 basis points (bps). According to the CME FedWatch tool. Market anticipation about a Fed rate decrease of 50 basis points has diminished in recent weeks following the September US job report. Which indicated that labor demand remained strong and wage growth was faster than projected.
