EURUSD increases as expectations of a substantial Fed cut weigh on the US dollar.

EURUSD surges to almost 1.1100 in Friday’s European session. The major currency pair increases as the Euro (EUR) strengthens following Thursday’s monetary policy decision by the European Central Bank (ECB), while the US Dollar (USD) falls following August’s lackluster US Producer Price Index (PPI) data. The ECB lowers its Rate On Deposit Facility by 25 basis points (bps) to 3.50%, as expected.

The Central Bank was Already expected to drop its key borrowing rates, the Eurozone’s economic outlook appears to have deteriorated due to a weak demand environment, as pricing pressures across the old continent continue to ease.

President Lagarde of the European Central Bank declined to provide a particular route for interest rate cuts.

The Euro’s outlook has strengthened as a result of the lack of a predetermined path for interest rate cuts in the monetary policy statement and ECB President Christine Lagarde’s news conference. Lagarde’s comments at the press conference indicated that the central bank will take a data-centric approach, stating that “interest rate decisions will be based on its assessment of the inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission.”

For the rest of the year, market participants predict the ECB decreasing interest rates. rates one more time, as pricing pressures are projected to ease further. ECB policymaker Joachin Nagel told German radio Deutschlandfunk in the late Asian session that “we assume that core inflation will improve, especially with the declining wage trend in the Eurozone.”

Eurozone industrial production fell by 2.2% year on year (YoY) in July, according to Eurostat statistics released on Friday. The figure was higher than the projected -2.7% and the -4.1% (updated from -3.9%) recorded in June. Monthly industrial production fell by 0.3%, as forecast.

Daily Market movers: EURUSD advances as US Dollar falls more.

The US Dollar Index (DXY), which analyzes the Greenback’s value versus six major currencies, has extended its Downside to around 101.00. The US dollar is under heavy selling pressure as market anticipation grows that the Federal Reserve (Fed) will cut interest rates by 50 basis points (bps) on Wednesday.
According to the CME FedWatch tool, the chance of the Fed cutting interest rates by 50 basis points (bps) to 4.75%-5.00% in September has risen substantially to 43% from 14% following the release of US PPI data.
According to Thursday’s PPI statistics, producer inflation increased at a slower-than-expected annual rate in August. The headline inflation rate increased by 1.7%, slower than expected at 1.8%, and from 2.1% in July, which was revise ownward from 2.2%. In the same period, the core producer inflation, which includes volatile food and energy prices, grew steady by 2.4%, slower than anticipated. of 2.5%.

A slower rate of price increases for products and services at factory gates reflects a slowing consumer spending trend, which has traditionally resulted in Federal Reserve (Fed) interest rate cut bets.

Investors will now focus on the preliminary Michigan Consumer Sentiment Index data for September, which will be release at 14:00 GMT.

Investors will now focus on the preliminary Michigan Consumer Sentiment Index data for September, which will be release at 14:00 GMT. The sentiment data expected to have remained nearly constant at 68.0 from the previous publication of 67.9.