The EUR/USD maintains a stable position above the 1.1800 mark on Tuesday, following Federal Reserve Chair Jerome Powell’s neutral stance, alongside business activity data from Europe and the United States indicating a deceleration in both economies. The pair is experiencing slight increases of 0.09%.
EUR/USD remains stable as Powell indicated that policy continues to be modestly restrictive yet adaptable. Flash PMIs in the US and Eurozone indicate a deceleration in activity, which raises apprehensions regarding GDP figures to be released later this week. The Federal Reserve is anticipated to implement a rate cut in October, whereas the European Central Bank is expected to maintain its current stance, which supports a bullish outlook for EUR/USD.
> Dollar remains under pressure due to risk appetite; the divergence in policy between the Fed and ECB supports the Euro : The Dollar remains under pressure due to risk appetite, but the Euro has not been able to take advantage of this weakness. Fed Chair Jerome Powell made headlines, closely mirroring his statements from the Federal Open Market Committee press conference. He stated that the policy trajectory is challenging, as the central bank must consider both objectives of the dual mandate “equally.” He emphasized that the downside risks in the labor market have increased, although inflation remains “somewhat elevated,” even as it comes into better balance. He noted that the existing monetary policy approach is “modestly restrictive, leaves us well positioned to respond to potential economic developments.” From a data perspective, the Flash Purchasing Managers’ Index in the US and the Eurozone indicated a slowdown in business activity, which may impact the forthcoming economic growth figures, as the US Gross Domestic Product is scheduled for release this week.
> The divergence in monetary policy between the Fed and the ECB is likely to support the appreciation of the Euro : In light of current trends, the Federal Reserve is anticipated to lower interest rates during the October meeting. The European Central Bank is expected to maintain its current interest rates, as indicated by President Lagarde’s comments after the most recent ECB meeting, where she stated, “The disinflation process is over.” On Wednesday, the agenda will include Germany’s IFO Business Climate, Current Assessment, and Expectations for September. In the US, market participants are closely monitoring upcoming housing data and remarks from Federal Reserve officials.
Latest FX Rate Trends : Euro stabilizes amid economic slowdowns in the US and Eurozone
- In September, the US S&P Global Manufacturing PMI experienced a decline, falling to 52.0 from the previously reported 53.0. In the meantime, the Services PMI decreased to 53.9, down from 54.5 in August. S&P Global disclosed that prices paid increased to 62.6 in September, rising from 60.8 the previous month, with businesses citing tariffs “as the principal cause of further cost increases.”
- Fed Chair Jerome Powell stated that “downside risks to employment shifted balance of risks, prompting to last week’s rate cut,” and noted that the rate cut transitioned policy to a more neutral stance. While recognizing the employment risks, he stated that “two-sided risks mean there is no risk-free path.”
- Atlanta Fed President Raphael Bostic expressed his willingness to consider implementing an inflation target range and cautioned about potential inflationary pressures on the horizon.
- Fed Governor Michelle Bowman indicated her expectation of three rate cuts in 2025 to bolster the labor market. Meanwhile, Chicago Fed President Austan Goolsbee highlighted the importance of the central bank in restoring inflation to its 2% target.
- The Eurozone HCOB Manufacturing PMI in September decreased from 50.7 to 49.5, falling short of expectations for an expansion of 50.9. The Services PMI for the same period increased to 51.4, up from August’s figure and estimates of 50.5.
- The US Dollar Index, which measures the value of the American currency against a basket of six peers, has decreased by 0.09%, now standing at 97.21.
- The Federal Reserve is anticipated to reduce rates by 25 basis points during the meeting on October 19, according to insights. The probability stands at 91%.