EUR/USD shows signs of recovery on Tuesday as the Greenback experiences a decline following neutral-dovish comments from Fed Chair Jerome Powell, coupled with the French government’s announcement to suspend a pension reform. The currency pair is currently trading at 1.1606, reflecting an increase of 0.32%.
Fed’s Powell indicates a “meeting-by-meeting” approach, stating that labor risks currently surpass inflation pressures. France halts pension reform in response to political turmoil, providing a short-term boost to Euro sentiment. The dollar experiences a decline as tensions between China and the US escalate, coupled with a further deterioration in business sentiment within the United States.
> The Euro experiences a rebound following the cautious signals from the Fed Chair, alongside France’s decision to suspend its contentious pension overhaul : The Euro’s appreciation was primarily driven by a neutral-dovish stance from Powell, who indicated that the economy is experiencing a low-hiring, low-firing trend, while also recognizing that risks to the labor market have risen in relation to inflation. He noted that the economy is stronger than anticipated and confirmed that the central bank is adopting a meeting-by-meeting strategy. Boston Federal Reserve Susan Collins expressed a somewhat hawkish stance, noting that inflation remains a primary concern. She added that despite some further easing, the policy would still be “mildly restrictive.” The tensions between the US and China sparked a sell-off of the Dollar on Tuesday. US President Donald Trump’s harsh rhetoric towards Beijing is prompting a response from Chinese authorities, who have implemented additional port fees on US vessels. The data indicates that business sentiment in the US has declined. In the Eurozone, consistent inflation figures from Germany and a decline in the Survey of Expectations applied downward pressure on the currency pair, although the shared currency managed to recover towards the end of the day. Meanwhile, European Central Bank President Christine Lagarde emphasized that monetary policy is well-positioned, while Villeroy highlighted that the next action from the bank is more likely to be a cut rather than an increase.
Latest FX Rate Trends : Euro strengthened by a depreciating US Dollar
- Fed Chair Jerome Powell indicated that the outlook for employment and inflation has “not changed much” since the September policy meeting, highlighting that recent data imply economic activity may be stronger than anticipated. He noted that risks to the labor market have increased in tandem with inflationary pressures.
- Powell noted that the rise in inflation is primarily due to increased prices of goods, highlighting that this surge is a result of tariffs rather than overarching inflationary patterns.
- Boston Federal Reserve Susan Collins stated, “inflation should begin to ease as tariff impact fades.” She recognized that downside risks to the labor market had increased, yet emphasized that favorable financial conditions would bolster households.
- An update on consumer price inflation is scheduled for the Fed on October 24. The US Bureau of Labor Statistics has announced the upcoming release of its latest Consumer Price Index report, coinciding with the current shutdown.
- The US Dollar Index, which measures the value of the dollar against a basket of six currencies, has decreased by 0.25%, now standing at 99.00.
- The NFIB Business Optimism Index decreased by 2.0 points to 98.8 last month, marking the first decline in three months. The NFIB Uncertainty Index increased by 7 points from August, reaching a level of 100, marking the fourth highest reading in more than 51 years.
- The money markets are currently reflecting a complete pricing in of a 25-basis-point rate cut at the Federal Reserve’s meeting on October 29, with the probability standing at 97%, as indicated by the Prime Market Terminal probability tool.
- Economic Sentiment decreased to 39.3, falling short of the anticipated 41, yet surpassing the prior figure of 37.3. The Current Conditions have unexpectedly deteriorated to -80.0, a decline from last month’s -76.4, and falling short of the anticipated improvement to -74.8. The ZEW President stated that “Hopes for a medium-term recovery remain”.