The EUR/USD pair shows upward movement in the North American session following the European Central Bank’s decision to maintain interest rates, while the US dollar experienced a decline after the Consumer Price Index (CPI) report met expectations. Currently, the pair is trading at 1.1733, reflecting an increase of 0.34%.
The EUR/USD pair experiences upward momentum due to weaker-than-anticipated US CPI figures and the highest jobless claims recorded in almost four years. Dollar weakness counterbalances stable Eurozone policy, as the ECB reaffirms its data-dependent and meeting-by-meeting approach to interest rates. Markets indicate that the Federal Reserve’s easing trajectory remains intact, which supports the EUR/USD above the critical 1.1700 level during the North American session.
> The Euro appreciates by 0.34% following the ECB’s decision to maintain steady rates, reflecting underlying weakness. US labor data strengthens expectations for a Federal Reserve rate cut : The most recent inflation report in the US indicated that consumer prices rose, yet remained consistent with projections, thereby preserving the existing economic conditions. Initial Jobless Claims data indicated that the number of Americans applying for unemployment benefits surpassed expectations, reaching its highest level in almost four years. The European Central Bank has kept the Deposit Rate steady at 2%, indicating that any adjustments to monetary policy will be determined on a meeting-by-meeting basis, guided by incoming data. The Governing Council disclosed that they are not following a predetermined trajectory regarding interest rates.
Latest FX Rate Trends : EUR/USD increases following US CPI data
- The US Consumer Price Index (CPI) increased to 2.9% year-over-year in August, up from 2.7%, meeting market expectations. Core CPI remained stable at 3.1% year-over-year, aligning with expectations and consistent with the figure from July. The market response remained muted, as expectations for a Fed rate cut were largely unchanged.
- In a separate report, Initial Jobless Claims for the week ending September 6 increased to 267K, significantly surpassing the consensus estimate of 235K and exceeding the previous figure of 237K, highlighting a resurgence of weakness in the labor market.
- President Christine Lagarde of the ECB stated that the disinflationary process has concluded, emphasized that policy is currently well-positioned, and noted that the decision made today was unanimous. Additionally, she noted that trade uncertainty has lessened and that the risks to economic growth are skewed towards the downside.
- The US Dollar Index (DXY), which evaluates the performance of the greenback relative to a group of six currencies, has decreased by 0.28%, currently standing at 97.53.
- Fitch Ratings Agency anticipates two rate cuts of 25 basis points, scheduled for September and December, along with three additional reductions projected for 2026. On the other hand, the ratings agency does not foresee any rate reductions by the European Central Bank (ECB) in the future.
- Following the data release, market participants have assigned a 90% probability to the Federal Reserve implementing a 25 basis points (bps) policy easing, while a 10% probability is attributed to a 50-bps reduction, as indicated by the Prime Market Terminal interest rate probability tool. The ECB is expected to maintain current rates, with a 93% likelihood, while there is only a 7% probability of a 25-bps reduction.