EURUSD holding gains near 1.0850 due to strong Eurozone GDP growth and high German inflation
Following Wednesday’s dramatic recovery, the EURUSD is trading near 1.0850 in the European session on Thursday. The major currency pair rose as traders reduced their expectations for a substantial interest rate decrease from the European Central Bank (ECB) at its December monetary policy meeting following faster-than-expected Eurozone GDP growth and higher-than-expected German inflation.
Eurostat said on Wednesday that the Eurozone In the third quarter of this year, the economy grew at a quicker rate of 0.9% than in the same period the previous year. Germany, the Eurozone’s largest economy, made a significant contribution to greater growth after avoiding a technical recession. The German economy unexpectedly increased by 0.2% from the previous quarter, exceeding estimates of a 0.1% drop. Meanwhile, Spain’s growth rate exceeded expectations, as did France’s, while Italy’s was slower than predicted.
ECB Lagarde anticipates more interest rate decreases and expressed hope that inflation will return to the bank’s aim of 2%.
The German flash Harmonized Index of Consumer Prices (HICP) for October rose at a quicker rate of 2.4% year on year, exceeding expectations of 2.1% and the previous release of 1.8%, implying that the war against inflation is far from done.
“Just released According to ING analysts, a flash estimate of German inflation in October may cause some ECB members to regret the most recent rate drop and the European Central Bank’s increased willingness to make more aggressive cuts.
For more information on the present state of inflation, investors will look to the Eurozone flash HICP data for October, which will be release at 10:00 GMT.
Meanwhile, ECB President Christine Lagarde expressed confidence in containing price pressures in an interview with the French newspaper Le Monde published on Thursday. “The objective is in sight, but I am not going to tell you that inflation is under control,” she said. She maintained her commitment to lowering interest rates, but declined to commit to a precise rate cut route.
Daily Market movers: EURUSD remains stable, while US Dollar consolidates.
EURUSD is holding over 1.0850 on the back of positive Eurozone GDP statistics. Even while increased Eurozone GDP growth has improved the Euro’s (EUR) appeal, the currency’s outlook remains uncertain as the United States (US) presidential election approaches.
Traders appear to have priced in a victory for former President Donald Trump over current Vice President Kamala Harris, a scenario that would have significant ramifications for the Eurozone economy, as Trump is expected to raise tariffs by 10% on all imports, harming the Eurozone’s powerful export sector. Trump stated this week that the European Union (EU) would have to “pay a big price” for not purchasing enough American commodities if he won the November 5 election. Reuters reported.
US presidential election, the NFP report, and the ISM Manufacturing PMI data will all have an impact on the US dollar.
US Dollar (USD) is trading in a narrow range, with investors anticipating the release of US Nonfarm Payrolls (NFP) and ISM Manufacturing PMI data for October on Friday. The economic data will affect market speculation on the Federal Reserve’s (Fed) interest rate reduction path. Later on Thursday, the Personal Consumption Expenditure (PCE) Price Index data for September will be released, but its influence on markets is expected to be limited because the US GDP report on Wednesday already revealed the overall results for Q3.
Job market conditions appear to be improving, according to the ADP private employment measure released on Wednesday. The study revealed a healthy labor demand, with 233K new workers employed in October versus 159k in September.
