EURUSD remains volatile as investors await a series of Fed speakers to provide fresh interest rate direction.
In Monday’s European session, the EURUSD trades gingerly near its more than four-month low of 1.0700. The major currency pair remains on edge, as Republican Donald Trump’s victory as President of the United States has improved the long-term prognosis for the US Dollar (USD). The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has risen to near 105.00.
The euro falls since Trump’s plans projected to have a negative impact on Eurozone exports.
During his election campaign, Trump promised to decrease taxes and boost import tariffs This would increase US inflationary pressures and debt levels. According to a Reuters poll conducted on November 6-7, 62% of respondents, including 94% of Democrats and 34% of Republicans, believe that Trump’s actions “will push the US national debt higher.”
According to the nonpartisan Committee for a Responsible Federal Budget, Trump’s proposed tax cuts may increase the nation’s debt by $7.5 trillion over the next decade.
This week, markets will focus on October’s US inflation statistics.
This week, investors will pay particular attention to talks by a bevy of Federal Reserve (Fed) officials for new clues regarding the anticipated monetary policy action in December. According to the CME FedWatch tool, there is a 65% possibility that the central bank will decrease interest rates by another 25 basis points (bps) to 4.25%-4.50% % for December. This would be the Fed’s second quarter-to-a-percent interest rate drop in a row, after lowering its main borrowing rates last week.
On the economic front, investors will be watching the October US Consumer Price Index (CPI) data, which will be released on Thursday. The impact of the inflation report on interest rate expectations is expected to be minimal, as Fed officials remain confident in the disinflation trend toward the bank’s 2% target. However, a considerable departure from agreement could have an impact on the outcome.
Daily market movers: EURUSD is under pressure with the Euro’s dismal outlook.
EURUSD remains on tenterhooks, as the Euro’s (EUR) outlook is uncertain due to concerns of a global trade war following Trump’s victory in the American presidential election. During the election campaign, Trump warned that if the European Union did not buy enough American commodities, it would face significant consequences.
The impact of Trump’s triumph is visible among European economic elites. Former European Central Bank (ECB) President Mario Draghi told the European Union (EU) Summit on Friday that “the sense of urgency today is greater than it was a week ago,” according to Reuters.
Domestic issues in the Eurozone’s major members have also reduced the Euro’s popularity. The breakup of Germany’s three-party government comes at a difficult time for the economy. The nation managed to avoid a technical recession after unexpectedly expanding by 0.2% quarterly in Q3, according to The Federal Statistics Office of Germany issued data on October 30. However, political instability may cause the government to postpone expenditures and development.
Meanwhile, investors are looking for new clues regarding the ECB’s expected interest rate action at its December meeting. Robert Holzmann, ECB policymaker and head of the Austrian National Bank, stated that there is no reason for the central bank not to decrease interest rates next month at this time; nonetheless, the decision will be based on economic statistics released in December.
