EURUSD expected to continue to decline below 1.0500 because ECB policymakers worried about the growing risks to Eurozone economic growth.
During Thursday’s European trading hours, the EURUSD exchange rate still susceptible above the psychological support of 1.0500. The Euro’s poor performance on expectations that the European Central Bank (ECB) could quicken its policy-easing cycle puts selling pressure on the major currency pair.
It generally expected that the ECB will lower its Deposit Facility Rate by 25 basis points (bps) to 3% in the December meeting and anticipated to move more quickly toward the neutral range in 2025 as market players become concerned about the economic prospects of the Eurozone.
When US President-elect Donald Trump takes office and carries out his economic agenda, investors anticipate that the European Union (EU) will face challenges that could result in a global trade war, particularly with China and the Eurozone. The euro bloc will “pay a big price” for not purchasing enough American exports, Trump said during his campaign.
ECB officials want the central bank to keep lowering interest rates in order to lessen the level of monetary policy.
ECB officials want the central bank to keep lowering interest rates in order to lessen the level of monetary policy tightness because they are concerned about the growing risks to Eurozone economic growth. François, the governor of the Bank of France and an ECB policymaker “The balance of risks on growth and inflation is shifting to the downside,” Villeroy de Galhau stated in a speech in Tokyo on Wednesday. Villeroy went on to say that “agile pragmatism” should direct the rate-cutting strategy of the European Central Bank in the future. He did, however, rule out that US tariffs would have a major effect on the inflation outlook for the Eurozone.
US PMI data for November will be closely watch by investors.
Investors will be watching Friday’s release of the November flash HCOB Purchasing Managers Index (PMI) data for the Eurozone and its major countries to learn about the current state of economic health and forward demand. Flash readings are expected to show that the overall private business activity remains at the expansionary borderline.
Daily Market update: EURUSD declines as the US dollar seeks further gains.
EURUSD margins declining as the US dollar (USD) maintains its recovery from Wednesday and aims to reach new all-time highs. The US Dollar Index (DXY), which measures the value of the US dollar relative to six other major currencies, gains momentum and breaks above the current high of 107.00. Because Donald Trump will be able to easily implement his trade and tax policies after winning both houses, the greenback has been performing better.
The US economy will experience inflation as a result of Trump’s policies, which will also prevent the Fed from making significant interest rate cuts. The effect is evident in the sharp decline in market expectations for Fed interest rate cuts in December. The Fed’s likelihood of cutting interest rates next month has decreased from 73% to 56% based on the CME FedWatch tool, a week ago.
Federal Funds Rate target for 2025 has also been raise by market analysts.
The Federal Funds Rate target for 2025 has also been raise by market analysts. The terminal fed funds rate forecast by Bank of America (BofA) has been raised from 3.00% to 3.25% to 3.75% to 4.00%.
The preliminary S&P Global PMI data for November, which scheduled to be release on Friday, will serve as the basis for future movements of the US dollar. Economists anticipate an improvement in the private sector’s overall activity.
