Oct 28, 2022
VOT Research Desk
The EUR/USD pair lost the majority of the Wednesday gains and ended Thursday below the 1.0000 level.
The European Central Bank’s announcement of its monetary policy decision served as the primary motivator. As anticipated, the central bank increased the three key rates by 75 basis points.
The subsequent statement, however, demonstrated that officials continue to be very worried about economic developments. Policymakers noted that, among other things, activity is likely to have slowed substantially in Q3, and that additional deterioration is anticipated over the course of the rest of the year and the next year.
Additionally, they pointed out that high inflation is having a negative impact on spending and production, and that a slowing economy could result in a little increase in the unemployment rate.
It’s important to note that three officials only requested a 50 bps rate increase, and the central bank declared it would reject forward guidance since it increased already high levels of uncertainty. President Christine Lagarde concluded by saying that future rate increases would be decided on a meeting-by-meeting basis and based on evidence. However, the US reported encouraging figures.
The economy increased at an annualized pace of 2.6% in Q3, which was better than the 2.4% projected and reversed the previous two quarters’ economic declines. This is according to the preliminary estimate of the GDP for the third quarter.
Initial Jobless Claims decreased to 217K in the week ending October 21, while Durable Goods Orders slightly increased in September, rising by 0.4% rather than the 0.6% analysts had predicted. As promising macroeconomic data supported high-yielding assets, the USD came under pressure.
The German Q3 GDP and the nation’s September Consumer Price Index are both on Friday’s macroeconomic schedule.
While the US will report September PCE inflation and the October Michigan Consumer Sentiment Index, the EU will issue the October Economic Sentiment Indicator.
