EURUSD rises to around 1.0900 as the US Dollar is under significant selling pressure ahead of the presidential election and the Fed’s policy announcement.
In Monday’s European session, EURUSD jumped around the important resistance level of 1.0900. The gain in the major currency pair supported by an upbeat Euro (EUR), which performed strongly since last week after a deluge of Eurozone economic data reduced expectations of the European Central Bank (ECB) delivering substantial rate cuts in December.
Eurostat announced that the Eurozone economy grew faster than predicted in the third quarter of the year.
Eurostat announced that the Eurozone economy grew faster than predicted in the third quarter of the year. Upbeat Eurozone Gross Domestic Product (GDP) figures forced traders to reduce bets for a larger-than-usual interest rate decrease of 50 basis points at the policy meeting next month. According to the flash estimate, inflationary pressures in the Eurozone rose to 2% in October, impacting on the ECB’s large rate cut predictions.
Meanwhile, the final HCOB Manufacturing PMI data for October from Germany and the Eurozone outperformed flash estimates. The Manufacturing PMI, which measures activity in the German and Eurozone industrial sectors, rose to 43.0 and 46.0, respectively. Eurozone Sentix Investor Confidence is a sentiment indicator that measures the collective opinion of Numerous financial experts’ assessments of current economic health and ahead expectations remained dismal, but improved to -12.8 in November from -13.8 in October.
Investors will look forward to ECB policymaker and Bundesbank President Joachim Nagel’s speech for fresh interest rate direction.
Daily Mrket movers: EURUSD rises significantly as US Dollar falls.
EURUSD rises to approximately 1.0900 at the expense of the US Dollar (USD) as uncertainty builds ahead of the US presidential election on Tuesday and the Federal Reserve’s (Fed) monetary policy meeting on Thursday.
The US Dollar has begun the week on a pessimistic note, with the US Dollar Index (DXY) falling below 103.70 as market players foresee a neck-and-neck competition between former President Donald Trump Kamala Harris is the current Vice President.
The most recent polls show Harris with a tiny advantage against Trump.
The significant sell-off in the US dollar followed the release of the Des Moines Register/Mediacom Iowa Poll, which showed Harris leading Trump by three points in the state, according to Reuters. The poll results represent a shift from September in a state that Trump won convincingly in both 2016 and 2020.
Traders regard a Trump victory as favorable for the US dollar and Treasury yields because he promised to raise import tariffs and decrease taxes, both of which would likely increase inflationary pressures and force the Fed to return to a restrictive policy posture. On the contrary, a Harris victory viewed as a continuation of present government policies, which traders see as advantageous to risk-sensitive currencies. Meanwhile, the Fed scheduled to convene on Thursday to decide on interest rates. The meeting, however, is likely to be overshadowed by the outcome of the US election, as well as the fact that traders have fully priced in a 25 basis point (bps) rate cut, which would bring key borrowing rates down to 4.50%-4.75%, according to the CME Fedwatch tool.
Nonetheless, investors will pay particular attention to the guidance for monetary policy action at this year’s final meeting, which will be place in December. Markets also expect the Fed to lower interest rates by 25 basis points (bps) next month.
On the economic front, investors will focus on the US ISM Services Purchasing Managers’ Index (PMI) data for October. be published on Tuesday. The Services PMI expected to be 53.5, down from 54.9 in September, indicating that the index still expanding, but at a slower pace.
