EURUSD remains under pressure as the ECB expected to lower interest rates again in December.
In Tuesday’s European session, the EURUSD traded close to a new 11-week low at round-level support at 1.0800. The Euro (EUR) remains volatile as traders expect the European Central Bank (ECB) to lower interest rates again in December, as mounting risks to Eurozone economic growth are projected to keep inflationary pressures close to the central bank’s 2% target. This would mark the ECB’s fourth interest rate drop this year.
Data released On Monday, the German Producer Price Index (PPI) fell by 1.4% year on year (YoY) in September, quicker than 0.8% in August, indicating that producers are unable to raise prices of products and services at factory gates due to low household spending.
ECB President Christine Lagarde will share new insights into the interest rate outlook.
On Monday, Slovak central bank president and ECB policymaker Peter Kazimir stated that he is increasingly optimistic that the disinflationary trend would continue. However, he wants more data before declaring success over inflation.
Gediminas Šimkus, the governor of Lithuania’s central bank and a member of the European Central Bank’s Governing Council, expressed a more dovish outlook. Šimkus remarked, “If the disinflation processes get entrenched, it’s possible that rates will be lower than the natural level.” The ‘natural level’ of interest rates is Between 2 and 3 percent.
Investors will pay special attention to ECB President Christine Lagarde’s interview with Bloomberg and panel discussion at the International Monetary Fund (IMF) meeting in Washington on Tuesday. Lagarde is likely to deliver fresh interest rate guidance.
Multiple headwinds, such as a robust US Dollar (USD) and growing European Central Bank (ECB) dovish wagers, keep the currency near its immediate support of 1.0800. The US Dollar Index (DXY), which measures the value of the greenback against six major currencies, is hovering near a new 11-week high of around 104.00. The greenback rises on concerns about the US presidential election and growing anticipation that the Federal Reserve (Fed) will pursue a mild policy-easing cycle.
Recent surveys have revealed a neck-and-neck Competition between former US President Donald Trump and Vice President Kamala Harrish ahead of the elections, which are only two weeks away. Trump’s triumph projected to lead to higher import tariffs and reduced taxes, potentially prompting the Fed to boost interest rates further.
Fed policymakers believe modest interest rate reduction are appropriate.
Meanwhile, the Fed predicted to lower interest rates by 25 basis points (bps) in November and December, according to the CME FedWatch tool. Firm anticipation for a slower rate-cut cycle stems from investors’ rising confidence in the US economy following September’s strong Nonfarm Payrolls (NFP), ISM Services PMI, and Retail Sales statistics. In addition, Fed officials believe that a gradual rate cut path is acceptable.
This week, investors will pay attention to the preliminary S&P Global Purchasing Managers. Index (PMI) statistics for October will be release on Thursday.
Daily Market movers: EURUSD is under pressure as traders price in ECB rate cuts in December.
Due to a strong US Dollar (USD), EUR/USD remains volatile near the immediate support level of 1.0800. The US Dollar Index (DXY), which measures the value of the greenback against six major currencies, is hovering near a new 11-week high of around 104.00. The greenback rises on concerns about the US presidential election and growing anticipation that the Federal Reserve (Fed) will pursue a mild policy-easing cycle.
Recent surveys have showed a neck-and-neck race between former US President Donald Trump and Vice President Kamala Harrish ahead of the elections, which are only two weeks away. Donald Trump’s victory predicted to result in Higher import tariffs and lower taxes may push the Fed to boost interest rates further.
Fed predicted to lower interest rates by 25 basis points (bps) in November and December.
Meanwhile, the Fed is predicted to lower interest rates by 25 basis points (bps) in November and December, according to the CME FedWatch tool. Firm anticipation for a slower rate-cut cycle stems from investors’ rising confidence in the US economy following September’s strong Nonfarm Payrolls (NFP), ISM Services PMI, and Retail Sales statistics. In addition, Fed officials believe that a gradual rate cut path is acceptable.
This week, investor will focus on the preliminary S&P Global Purchasing Managers Index (PMI) data for October, which will be release on Thursday.
