- EUR/USD remains above the 1.1000 level as traders look forward to the ECB policy decision.
- Lower expectations for more aggressive Fed easing are supporting the USD and limiting the pair’s gains.
- Traders are cautious ahead of key central bank event risk and US PPI release.
The EUR/USD pair is struggling to gain significant traction during the Asian session on Thursday and is hovering in a tight range, just above the psychological level of 1.1000, or a four-week low touched the previous day. Traders seem reluctant and opt to wait for the highly anticipated European Central Bank (ECB) policy meeting before positioning for the next directional move.
The ECB is widely expected to cut interest rates by 25 basis points (bps) amid signs of cooling inflation in the Eurozone. Bets were reaffirmed by data showing that the German Consumer Price Index (CPI) fell to its lowest level in more than three years in August and hit the ECB’s 2% target. This, in turn, undermines the shared currency and acts as a headwind for the EUR/USD pair amid modest US Dollar (USD) strength.
The US CPI report released on Wednesday indicated that US consumer prices are declining overall. However, the core CPI suggested that underlying inflation remains persistent and dashed hopes for a larger rate cut by the Federal Reserve (Fed) next week. This is reinforced by a spike in US Treasury bond yields and lifts the Dollar Index (DXY), which tracks the greenback against a basket of currencies, closer to the monthly peak.
That said, markets have fully priced in the prospects of an imminent start of the Fed policy easing cycle and a 25bp rate cut at the end of the FOMC meeting on 17-18 September. This, coupled with market optimism, limits any further appreciation move for the safe-haven dollar. This should continue to offer some support to the EUR/USD pair ahead of the key central bank risk event and warrants caution for bears.
Investors might also prefer to wait for the updated economic projections from the ECB, which, along with comments from ECB’s Christine Lagarde, will influence the Euro. Apart from this, the publication of the US Producer Price Index (PPI) could provide a fresh boost to the EUR/USD pair and produce some significant trading opportunities later during the American session.
Economic indicator
ECB interest rate decision
He European Central Bank The ECB is the bank for Europe’s common currency, the euro. The ECB’s main task is to maintain the purchasing power of the euro and price stability in the Eurozone. The Eurozone comprises the 16 countries of the European Community that have introduced the euro since 1999. This interest rate affects a range of interest rates set by commercial banks, building societies and other institutions towards their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds, shares, and exchange rates, which affect consumer and business demand in a variety of ways.
Next post:
Thu Sep 12, 2024 12:15 PM
Frequency:
Irregular
Dear:
4%
Previous:
4.25%
Fountain:
European Central Bank
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
