The EUR/USD pair fell below 1.1150 following softer-than-expected inflation data from France and Spain, raising prospects of an ECB rate cut in October. With the US Dollar weakening before the release of the PCE inflation data, the pair managed to recover and climb back above 1.1150 in the European session.
Inflation data plays a crucial role in shaping market expectations for the Fed’s interest rate outlook. All eyes are on the PCE report for August, which is expected to show core inflation rising to 2.7% year-on-year from 2.6% in June. Traders anticipate a potential interest rate cut by the Fed in November, with uncertainty over the size of the rate cut.
Investors are keeping a close watch on upcoming events, including Fed Chair Jerome Powell’s speech, labor market data, and the ISM Purchasing Managers’ Index, to gauge the direction of the US Dollar. The US Dollar Index retreats as traders await the PCE report to guide their trading decisions.
The European Central Bank is under pressure to cut interest rates again in October after the recent slowdown in French and Spanish inflation. Annual CPI in France grew at a slower pace of 1.5%, well below expectations, while Spain’s HICP also fell below estimates. The ECB is expected to make its third interest rate cut in the current easing cycle.
The Euro showed strength against the British Pound and some other major currencies on the day, despite ongoing concerns about inflation and the possibility of ECB rate cuts. Going forward, investors will closely monitor the preliminary HICP data for Germany and the Eurozone to forecast market movements.
EUR/USD has been consolidating within a range below 1.1200, with key levels to watch for potential breakouts. The pair remains bullish, with support at 1.1000 and resistance at 1.1200. The RSI indicator suggests weakening momentum, while the 20-day EMA indicates a bullish trend.
In conclusion, the EUR/USD pair remains in focus amid evolving inflation data and central bank policies. Market participants are awaiting key economic indicators and speeches from central bank officials to guide their trading decisions in the coming days. Traders are advised to stay informed and monitor developments closely for potential trading opportunities.
