The EUR/USD pair remained stable on Tuesday as it failed to reach the 1.1000 mark, but managed to halt its recent decline from the 1.1200 region. The Euro has fallen by two and a third percent against the US Dollar since hitting a one-year high in late September, sliding back to the 1.0950 region as the Greenback gained strength across the board. European data has been relatively muted for most of the trading week, with the ECB set for another rate call next week, leaving the economic calendar empty of EU-focused data until then.
Investors will be focusing on the Federal Reserve’s Meeting Minutes from the September rate cut meeting, set to be released on Wednesday. Markets were hoping for a double rate cut in November following the jumbo 50 bps rate trim in September, but strong core inflation levels and unexpectedly positive US labor figures have tempered these expectations. The CME’s FedWatch Tool indicates a nearly 90% probability of a 25 bps rate cut on November 7, following the September cut. Fed officials have suggested that further substantial rate cuts would require weakness in the US labor market.
Furthermore, US inflation figures are expected on Thursday with the release of September’s US Consumer Price Index (CPI). Core US CPI is forecasted to decrease to 0.2% MoM from the previous 0.3%, while annualized headline CPI inflation is expected to drop to 2.3% YoY from 2.5%. The EUR/USD pair is likely to enter a consolidation phase as daily candlesticks show a pattern of consolidation. Although the pair is trading between the 50-day and 200-day Exponential Moving Averages (EMA), buyers are struggling to push the Euro back above the 1.1200 handle.
The Euro, the official currency of the 19 countries in the Eurozone, is the second most traded currency globally behind the US Dollar. The European Central Bank (ECB) in Frankfurt, Germany is responsible for setting interest rates and managing monetary policy for the Eurozone. The ECB’s main objective is to maintain price stability through controlling inflation or stimulating growth by adjusting interest rates. Economic indicators such as HICP inflation data and GDP, among others, impact the Euro’s value.
The Eurozone’s economic health is closely monitored through data releases such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys. Strong economic data is beneficial for the Euro as it attracts foreign investment and may lead to interest rate hikes by the ECB. Additionally, the Trade Balance, which measures the trade surplus or deficit of a country, can influence the Euro’s value depending on the demand for its exports. Strong export demand can strengthen a currency, while a negative trade balance can weaken it.
In conclusion, the EUR/USD pair’s movement is influenced by a combination of economic data releases, central bank policies, and global market sentiment. As investors await the Fed Meeting Minutes and US inflation update, the Euro’s performance against the US Dollar will continue to be monitored closely. Traders should remain vigilant of potential market volatility and uncertainties in the coming days.
