EUR/USD declines on Wednesday, decreasing by 0.66% as the Greenback strengthens after Tuesday’s speech by Fed Chair Jerome Powell, who expressed caution about hastily lowering interest rates. The currency pair is currently trading at 1.1738, following a daily peak of 1.1819.
Powell emphasizes a balanced dual mandate, highlighting the risks to employment and inflation. US New Home Sales experienced a significant increase of over 20% in August, bolstering the Dollar’s recovery following the release of weaker PMI data earlier in the week. The German IFO sentiment has decreased to a four-month low, and the French Prime Minister has proposed tax increases, which adds additional pressure on the Euro’s outlook.
> Greenback shows signs of recovery following positive US housing data and cautious remarks from the Fed : Euro faces pressure due to disappointing German sentiment and discussions surrounding French taxation. The narrative surrounding the financial markets remains consistent, as investors continue to anticipate a minimum of two rate cuts by the Fed by year-end. Nonetheless, Powell indicated that the Fed would continue to evaluate both aspects of the dual mandate, given that the risks of inflation are skewed towards the upside while those for employment are leaning towards the downside. He emphasized that monetary policy is somewhat restrictive, yet “well positioned” for upcoming economic developments. In the interim, the housing market in the US has shown signs of improvement, as evidenced by August’s New Home Sales increasing by more than 20%, as reported by the US Census Bureau. The report strengthened the US Dollar, which experienced a sell-off on Tuesday following weaker than anticipated S&P Global Flash PMI data. On Wednesday, the flow of communications from Federal Reserve officials persisted, with San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee making headlines. The Euro commenced its decline following the latest IFO report, which dropped to a four-month low in September, indicating a setback in the economic recovery. French PM Lecornu has expressed his openness to a tax on top earners and firms, the economic calendar in the US will include Initial Jobless Claims for the week ending September 20, Durable Goods Orders, Gross Domestic Product figures, and additional remarks from Fed speakers on Thursday. In the Eurozone, Germany’s GfK Consumer Confidence Survey for October will provide an update on the status of households.
Latest FX Rate Trends : Euro declines sharply, influenced by Germany’s IFO data
- The US Dollar Index, which measures the dollar’s strength relative to a selection of six currencies, has increased by 0.66%, reaching a value of 97.85.
- In August, New Home Sales experienced a significant uptick, rising from 0.664 million to 0.8 million, marking a 20.5% increase that surpassed projections of 0.65 million.
- Fed’s Goolsbee cautioned against implementing a series of rate cuts, noting that the jobs market remains largely steady and robust. He expressed discomfort with the idea of excessively frontloading cuts based on the assumption that inflation is likely to be merely transitory. He attributed his hesitation to lower rates to the policies of US President Trump.
- Mary Daly indicated that additional policy adjustments are probably necessary as the Fed aims to reestablish price stability and offer essential support to the labor market. She expressed complete support for the Fed’s 25bps rate cut last week, indicating that the risks to the economy had evolved and it was an appropriate moment to take action. She also highlighted that the Fed’s rate-path projections should not be interpreted as guarantees.
- Market participants are closely monitoring the upcoming release of Initial Jobless Claims for the week ending September 20, with projections indicating 235K individuals filing for unemployment benefits, an increase from the prior figure of 231K. The final reading of the US GDP for the second quarter is anticipated to hold steady at 3.3% YoY.
- Durable Goods Orders in August are expected to show improvement after July’s disappointing figure of -2.8%. Analysts project that orders will decline by -0.5% month-over-month.
- The IFO Business Climate in Germany for September experienced a decline, falling from 89 to 87.7, which is below the anticipated figure of 89.3. The Current Assessment decreased to 85.7 from 86.4 for the same period, indicating a decline in company satisfaction with current business conditions, while expectations have noticeably deteriorated. IFO Expectations declined from 91.6 to 89.7, falling short of projections for an increase to 92.
- Data from Prime Market Terminal indicates that the Federal Reserve is anticipated to lower interest rates by 25 bps during the meeting on October 19. The probability stands at 91%. The European Central Bank is expected to maintain its interest rates, as indicated by President Lagarde’s comments following the most recent ECB meeting, where she stated, “The disinflation process is over.”