- EUR/USD comes under downward pressure as Euro weakens on firm ECB rate cut prospects.
- The weak economic outlook for the Eurozone supports bets on ECB rate cuts in September.
- The US Dollar regains ground with US core PCE inflation data in focus.
EUR/USD falls from fresh highs of 1.1200 in New York trading on Wednesday as the Euro (EUR) weakens. The Euro is underperforming against its major peers as investors seem confident that the European Central Bank (ECB) will cut interest rates again in September.
The ECB began cutting interest rates in June as policymakers appear confident that price pressures in the Eurozone will return to the bank’s 2% target by 2025. However, it decided to leave its key interest rates unchanged in July as officials were concerned that an aggressive policy easing process could reignite inflationary pressures again.
With evidence from the Eurozone’s preliminary HCOB PMI for August and second quarter negotiated wage rates indicating that the overall economic outlook is uncertain and wage pressures are easing, the ECB is widely anticipated to cut interest rates by 25 basis points in September. Traders also see the ECB cutting interest rates again sometime in the final quarter of this year.
For further clues on the path of interest rate cuts, investors are awaiting preliminary Harmonized Index of Consumer Prices (HICP) data for August from Germany and the broader Eurozone, due on Thursday and Friday respectively. Economists expect price pressures to have eased.
Euro PRICE Today
The table below shows the exchange rate of the Euro (EUR) against major currencies today. The Euro was the strongest currency against the Japanese Yen.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | -0.66% | -0.24% | -0.19% | -0.38% | -0.39% | -0.41% | -0.33% | |
| USD | 0.66% | 0.42% | 0.45% | 0.25% | 0.28% | -0.02% | 0.31% | |
| GBP | 0.24% | -0.42% | 0.02% | -0.18% | -0.14% | -0.14% | -0.12% | |
| JPY | 0.19% | -0.45% | -0.02% | -0.17% | -0.16% | -0.22% | -0.14% | |
| CAD | 0.38% | -0.25% | 0.18% | 0.17% | 0.03% | 0.00% | 0.06% | |
| AUD | 0.39% | -0.28% | 0.14% | 0.16% | -0.03% | -0.03% | 0.02% | |
| NZD | 0.41% | 0.02% | 0.14% | 0.22% | -0.01% | 0.03% | 0.06% | |
| CHF | 0.33% | -0.31% | 0.12% | 0.14% | -0.06% | -0.02% | -0.06% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the chart will represent EUR (base)/USD (quote).
Daily Market Moves Roundup: EUR/USD drops further as ECB rate cut prospects weigh on Euro
- EUR/USD corrects near 1.1100 in North American trading hours. The major currency pair falls as the US Dollar (USD) regains ground after posting a fresh yearly low this week. The Dollar Index (DXY), which tracks the greenback’s value against six major currencies, rises to near 100.80 from fresh lows of 100.50.
- A mild recovery in the US Dollar appears to be a short-lived pullback move for now, which could be capitalized as a selling opportunity by market participants. The near-term outlook for the greenback is vulnerable due to optimism that the Federal Reserve (Fed) will start cutting interest rates in September.
- While Fed rate cuts in September have been fully priced in by traders, bets are split on whether the central bank will cut interest rates gradually by 25 basis points (bps) or make a larger cut of 50 bps. According to the CME FedWatch tool, 30-day federal funds futures price data shows the probability of a 50 bps rate cut in September is 34.5%, while the rest favor a 25 bps cut.
- For fresh clues on the potential size of the rate cut, investors await the US (US) Personal Consumption Expenditures (PCE) core inflation data for July, due on Friday. The PCE Price Index report is expected to show that annual core inflation rose 2.7%, up from June’s reading of 2.6%, with monthly figures growing steadily by 0.2%. Signs of a further decline in core inflation would boost expectations for the Fed to take an aggressive policy easing approach. Conversely, persistent figures would temper this significant rate cut scenario.
Technical Analysis: EUR/USD drops further closer to 1.1100
EUR/USD is moving lower near 1.1100 after posting a fresh swing high at 1.1200. The overall outlook for the major currency pair remains firm as it holds the breakout of the symmetrical triangle chart pattern formed on the weekly time frame. The upward sloping 20-week exponential moving average (EMA) near 1.0900 supports further upside ahead.
The 14-period Relative Strength Index (RSI) is oscillating in the bullish range of 60.00-80.00, suggesting strong bullish momentum. On the upside, the July 2023 high of 1.1275 and the January 2022 high of 1.1500 will be the next targets for the Euro bulls. The downside is expected to remain cushioned near the psychological support of 1.1000.
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.
