EURUSD remains below 1.0900 as the ECB set to decrease borrowing rates by 25 basis points on Thursday.
EURUSD under pressure as the US Dollar has outperformed in recent weeks. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, continues to rise, approaching 103.40. The US dollar gains as traders anticipate the Federal Reserve (Fed) progressively lowering interest rates over the rest of the year.
The Fed anticipated to change to a’moderate’ program of easing from ‘Aggressive’ as fears of an economic downturn fade after Nonfarm Payrolls (NFP) and the US Services Purchasing Managers Index (PMI) rose sharply in September, with price pressures growing faster than anticipated.
According to the CME FedWatch tool, traders believe the central bank will lower interest rates by 25 basis points in November and December.
The Fed’s Waller recommended a steady lowering in interest rates over the following year.
In a lecture at Stanford University this week, Fed Governor Christopher Waller advised against interest rate cuts, stating that “whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year,” according to Reuters. When asked about the present state of the job market, Waller stated, “The labor market remains healthy, even though labor demand is moderating.”
Moving forward, The next trigger for the US Dollar will be the monthly Retail Sales data for September, which will be release on Thursday. Economists anticipate Retail Sales to increase by 0.3% after growing by 0.1% in August.
Daily market movers: EURUSD trades cautiously ahead of ECB policy.
The EURUSD fell further to around 1.0880 during Wednesday’s European session. The major currency pair falls as the Euro (EUR) underperforms amid expectations that the European Central Bank (ECB) would slash interest rates again on Thursday.
The ECB largely expected to lower its Rate on Deposit Facility by 25 basis points (bps) to 3.25%. This would be the ECB’s second interest rate lowering in a row. With tremendous faith in the ECB. Furthermore The ECB will lower interest rates tomorrow, and investors closely watch the monetary policy statement and ECB President Christine Lagarde’s news conference for new indications on the interest rate outlook.
The Eurozone’s economic outlook has been affected by growing suspicion that Donald Trump would win the US presidential election.
Lagarde’s statements expected to be dovish, as price pressures in the Eurozone appear to be under control and concerns about an economic slowdown have grown dramatically. According to preliminary estimates, the Eurozone Harmonized Index of Consumer Prices (HICP) dropped to 1.8% in September. Meanwhile, the second estimate of the monthly Consumer Price Index (CPI) (EU Norm) in France and Italy revealed that price pressures were weaker than anticipated.
Moreover Growing assumption that former US President Donald Trump may win the US presidential elections has also raised concerns. Concerns have been raised about the EU’s export future. Trump’s victory predicted to result in tariff increases on automobile imports to the United States, reducing exports from the old continent and slowing economic growth.
