- EUR/USD rises after an intraday drop to a one-week low, but lacks follow-through.
- Lower expectations for a 50 basis point Fed rate cut continue to benefit the USD and act as a headwind.
- Dovish ECB expectations further limit gains ahead of key US central bank data/event risks.
The EUR/USD pair is recovering a few pips from a one-week low around the 1.1030-1.1025 zone touched during the Asian session on Tuesday and for now, it seems to have snapped a two-day losing streak. However, any significant upside move still seems to elude amid some continued US Dollar (USD) buying.
Investors have been reducing their bets on a larger 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in September following the release of the mixed US employment report on Friday. This helps the Dollar attract some buyers for the third consecutive day and move back closer to the monthly peak touched last week, which, in turn, is seen as a headwind for the EUR/USD pair.
The shared currency’s relative underperformance could also be attributed to rising market expectations that the European Central Bank (ECB) will cut interest rates again in September amid declining inflation in the Eurozone. This could further contribute to capping the EUR/USD pair, although the downside is likely to remain contained ahead of key central bank data/event risks this week.
The latest US consumer inflation figures will be released on Wednesday, followed by the US Producer Price Index (PPI) on Thursday. This will play a key role in influencing market expectations on the size of the Fed’s rate cut move later this month, which will, in turn, boost demand for the USD. Apart from this, the crucial ECB policy decision on Thursday will provide a fresh directional impetus to the EUR/USD pair.
In the absence of any relevant market-moving economic releases on Tuesday, either from the Eurozone or the US, the aforementioned fundamental backdrop warrants caution for the bulls. Therefore, it will be prudent to wait for continued strong buying before confirming that the recent corrective pullback from the 1.1200 round mark, or a more than one-year high touched in August, has come to an end.
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.
