EUR/USD continues to decline for the third consecutive day, decreasing by 0.32% as the US government shutdown persists. Additionally, the minutes from the Federal Reserve’s last meeting indicate that officials are still wary of inflation, despite the easing of policy measures. Currently, the pair is trading at 1.1622, following a daily peak of 1.1661.
The EUR/USD pair experiences a decline for the third consecutive day, influenced by disappointing German economic data and the ongoing US government shutdown. Fed minutes indicate that officials continue to exercise caution regarding inflation, even as they signal potential rate cuts later this year. French PM Lecornu indicates advancements in discussions as Macron aims to establish a new government within the next 48 hours.
> Political instability in France and disappointing data from Germany are contributing to a decline in the Euro : The Euro is experiencing weakness primarily due to the political turmoil in France. Outgoing Prime Minister Sebastien Lecornu has indicated that there has been progress in negotiations with parliamentary groups, suggesting that President Macron may be able to appoint a new Prime Minister within the next 48 hours. The Fed minutes indicated that policymakers are open to further rate cuts this year; however, numerous members voiced apprehensions regarding inflation. The minutes indicated that “Most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased.” The US economic docket shows no significant data, while in Europe, German Industrial Production has decreased by 4.3% MoM, raising concerns about a potential recession in the largest economy of the bloc. This week, the Eurozone agenda includes Germany’s Trade Balance, the minutes from the European Central Bank’s last meeting, and a speech by Chief Economist Philip Lane. In the US, Federal Reserve Chair Jerome Powell will make a statement, followed by remarks from Governors Michelle Bowman, Michael Barr, and Minneapolis Fed President Neel Kashkari.
Latest FX Rate Trends : EUR/USD declines amid political unrest in France
- French Prime Minister Sébastien Lecornu indicated that there is potential for negotiation within parliament, highlighting that an absolute majority in the National Assembly is against a new dissolution. Lecornu communicated to President Emmanuel Macron that the probability of dissolution is decreasing and that the prevailing circumstances should facilitate the appointment of a new prime minister within the next 48 hours.
- The Fed Minutes disclosed the discussions among policymakers regarding their response to evolving risks, with a majority of officials expressing concerns about inflation, even as they recognized the potential risks in the job market. Officials expressed concerns regarding the safeguarding of the labor market and showed a preference for implementing policy adjustments “further over the remainder of this year.”
- Fed policymakers are divided on the fed funds rate, with nine supporting two cuts and Stephen Miren considering additional reductions, while the other nine anticipate either one or no further rate cuts.
- Money markets suggest that the Fed is poised to reduce interest rates by 25 basis points (bps) during the forthcoming meeting on October 29. The probability is currently at 94%, as indicated by the Prime Market Terminal interest rate probability tool.