EUR/USD increased by more than 0.21% on Monday, as market participants overlooked the downgrade of France’s sovereign credit rating amid ongoing political turmoil. Nevertheless, the anticipation surrounding the first rate cut in nine months by the Federal Reserve exerted downward pressure on the US Dollar. The currency pair is currently trading at 1.1763, having rebounded from daily lows of 1.1716.
The Euro has recovered from 1.1716 to 1.1763 as the markets have completely factored in a 25 basis point increase. September Fed cut, limited likelihood for 50 bps. US Retail Sales are anticipated to be weaker in August, while the slowdown in Industrial Production adds further pressure on the Greenback. The Eurozone’s attention shifts to the ECB’s Escriva speech, Italy’s inflation figures, ZEW surveys, and the overall industrial production data for the bloc.
>The Euro has increased by 0.21%, demonstrating resilience in the face of France’s downgrade, as traders shift their attention to the Federal Reserve, US economic data, and statements from ECB officials : The narrative surrounding financial markets remains consistent as the Federal Open Market Committee (FOMC) meeting approaches. The money markets have completely accounted for a 25-basis points rate cut by the Federal Reserve, while the likelihood of a substantial 50 bps cut remains slim, as illustrated by the Prime Market Terminal interest rate probability tool. In addition, the US economic calendar is set to include the Retail Sales data release on Tuesday, with projections indicating a decline in sales for August. Furthermore, it is anticipated that the Fed will reveal a continued deceleration in Industrial Production for the month of August. In the European arena, the agenda will include a speech by European Central Bank member Jose Luis Escriva. Market participants will focus on Italy’s inflation data, the ZEW Survey results from Germany and the Eurozone for September, as well as the Industrial Production figures for the Euro area.
Latest FX Rate Trends : Euro strengthened following comments from ECB’s Schnabel
- EUR/USD continued to rise, despite Fitch downgrading France’s sovereign credit rating from AA- to A+ due to a political deadlock anticipated following the elections. The remarks from ECB’s Isabel Schnabel contributed positively, stating that “interest rates are in a good place as inflation stabilizes around our 2% target, and the economy remains resilient at full employment.”
- US Retail Sales are anticipated to decelerate in August, increasing by 0.3% MoM compared to the prior 0.5%, potentially exerting additional downward pressure on DXY.
- Industrial Production for the same month is projected to decline by -0.1% MoM, a decrease of one-tenth from the prior month’s figure.
- The US Dollar Index, reflecting the performance of the greenback against a selection of six currencies, has decreased by 0.28%, currently standing at 97.34.
- 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 in the future.
- The European Central Bank has maintained its current interest rates, choosing a meeting-by-meeting and data-driven strategy, without committing to a predetermined trajectory for future rates.