EURUSD consolidates above 1.0500 as investors seek new signals for the Fed-ECB’s anticipated interest rate action in December.
EURUSD trades sideways just above the psychological support level of 1.0500. As the US Dollar’s (USD) rally stalls after setting a new annual high, the major currency pair consolidates. The US Dollar Index (DXY), which compares the value of the US dollar to six other major currencies, searches for new signals to push it higher than the crucial resistance level of 107.00.
Capital Economics analysts state that although a period of consolidation appears likely, We have updated our short-term projections for the US dollar and now anticipate an additional 5% increase by the end of 2025.” According to economists, “That is based primarily on a view that President-elected Donald Trump will push ahead with the core tariff policies he proposed on the campaign trail and that the United States (US) economy will continue to outperform its major peers.”
Powell of the Fed stressed that rate cuts don’t have to happen right away.
In order to understand how Trump’s policies will direct monetary policy action at the December meeting and in 2025, investors are searching for new indicators. Officials from the Federal Reserve (Fed) are not predicting how Trump’s policies will likely affect the economy or interest rate policy in the meantime. During Thursday’s event at Federal Bank of Dallas, Fed Chair Jerome The statement from Powell was, “I think it’s too early to reach judgments here.” Powell continued, “We don’t really know what policies will be put in place.”
Regarding the outlook for interest rates, Jerome Powell stated that there are no indications from the economy that would compel us to accelerate rate cuts. Nevertheless, he reaffirmed that inflation is on a sustainable trajectory towards the bank’s 2% target, which enables them to move towards the neutral rate.
Investors’ concerns about a trade war between the US and the Eurozone have grown.
Investors will be watching this week for the release of the preliminary S&P Global Purchasing Managers Index (PMI) data for November on Friday. The current state of private company activity and the effect of Trump’s victory on business optimism will be display by the PMI data.
Daily Market update: EURUSD remains below pressure amid fears of a potential trade war between the US and the Eurozone.
Investors’ attention is on European Central Bank (ECB) President Christine Lagarde’s speech at an event in Paris at 18:30 GMT, which is causing EURUSD to trade sideways. Investors want to know how much the Eurozone economy will be affected by Trump’s protectionist policies. Additionally, market players would search for indications regarding the size of the anticipated interest rate cut at the December meeting.
After Stephen Moore, a senior economist advisor to Donald Trump, stated on BBC radio over the weekend that the US would be less interested in a free trade agreement with Britain if the government placed its economic ties with the European Union first, fears of a trade war between the US and the Eurozone have increased (EU) before those with the United States, according to Reuters.
When Trump said during his election campaign that the euro bloc would “pay a big price” for not purchasing enough American exports, it set off a trade war between the US and the Eurozone.
Although a 50 basis point (bps) cut is far from certain, ING analysts predict that the ECB will lower interest rates once more in December.
