Those hoping that the data would allow EUR/USD to rise were sorely disappointed on Friday. Early estimates for both the UK and Eurozone PMIs were much worse than expected, while the US PMIs surprised to the upside. Leading indicators continue to point to completely different worlds on both sides of the Atlantic, and worse still, the data appears to diverge further. Therefore, it is not surprising that EUR/USD briefly fell below 1.04 on Friday, notes Commerzbank FX analyst Michael Pfister.
Interest rate expectations are one of the last hopes for a EUR/USD trend change
“It’s not just that the expected economic policies of a Trump administration will raise the outlook for US growth and inflation in the near future. Rather, Friday’s figures showed once again that the US already has a significant upside in growth, with the risk of this increasing. Given the combination of Trump and the already strong numbers, the market is now pricing in just over 50 basis points of rate cuts by October 2025.”
“There is now a not-so-small case for the Fed to pause rate cuts in December. On the other hand, Jerome Powell made it very clear in the last meeting that they will only analyze the impact of the new Trump administration when the plans are put into action Until then, they will continue as before. And despite the surprisingly strong September jobs report, the underlying trend remains downward. In addition, the Fed is likely to be more inclined to cut rates again in December to avoid the impression. who is doing it just to help one side in the electoral campaign.”
“In addition to interest rate expectations in the US, expectations for the Eurozone are also encouraging. The market is now more inclined to expect a big move in December, i.e. a 50bp cut has become more likely in recent weeks. Here too, our economists see a 25 basis point move as more likely. This is especially true in view of Friday’s November inflation numbers, which are expected to show a further increase. , interest rate expectations are currently one of the last hopes for an imminent trend change in EUR/USD.”
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.
