On Wednesday, EUR/USD experienced an increase of 0.35%, remaining above the 1.1600 level for the second consecutive day. This movement comes as the Greenback faces pressure from strong expectations of rate cuts by the Federal Reserve and the intensification of the trade war between the US and China.
DXY declines to a six-day low as markets anticipate additional Fed easing amid stagflation worries. The trade war intensifies as new port fees are implemented between the US and China, even in light of Trump’s more conciliatory rhetoric. Mixed Eurozone inflation data bolster expectations that the ECB will uphold its dovish stance.
> The Euro appreciates for a second consecutive day, influenced by a dovish Federal Reserve outlook and ongoing tensions between the US and China that weigh on the Greenback : The Euro is currently valued at 1.1647, following a daily low of 1.1601, as the Dollar experiences a six-day low, as indicated by the US Dollar Index. The DXY, which measures the performance of the US dollar against a basket of six other currencies, has decreased by 0.37%, currently standing at 98.66. Negotiations between Washington and Beijing have prolonged, following China’s implementation of export controls on rare earths and the introduction of port fees for US vessels. US President Trump intensified the situation by threatening to impose 100% additional tariffs on Chinese products; however, he ultimately decided against this course of action, stating that the US does not want to “hurt” China. Nonetheless, both nations implemented port fees in an alternating manner, as tensions persist between them. The US economic calendar is limited in data, yet the Fed’s Beige Book has been published, suggesting a potential stagflationary environment. In France, the inflation figures aligned with expectations, remaining below the European Central Bank’s 2% target. In Spain, prices increased by 3% in September, significantly exceeding the ECB’s target. Several ECB officials have made headlines, including Bundesbank President Joachim Nagel and Banque de France Governor Francois Villeroy de Galhau.
Latest FX Rate Trends : EUR/USD experiences a rally towards 1.1650 due to Dollar weakness
- The Fed’s Beige Book, released prior to the October 28-29 meeting, indicated that employment levels have largely remained stable in recent weeks, while labor demand has been generally subdued across most Districts and sectors.
- Overall economic activity exhibited minimal variation since the last report, with three Districts observing slight to modest growth, five reporting stability, and four indicating mild softening. Consumer spending has shown a slight decline, especially in the retail sector.
- US Treasury Secretary Scott Bessent indicated that Washington might contemplate an extended pause on elevated tariffs for Chinese goods in return for the relaxation of Beijing’s recently imposed restrictions on essential rare earth exports. “Is it feasible for us to extend the duration of the roll in return?” It is a possibility. “But all that’s going to be negotiated in the coming weeks,” Bessent stated to reporters at a press conference in Washington.
- On Tuesday, Fed Chair Jerome Powell adopted a dovish stance, recognizing the labor market’s weaknesses and suggesting that the central bank should transition to more “neutral” interest rates.
- According to Joachim Nagel, the German economy is showing signs of improvement. Francois Villeroy echoed some of his comments, stating that the global economy is surprisingly resilient. He also noted that France cannot afford to focus solely on short-term fiscal challenges and must seek credible solutions for reducing its deficit.
- In August, Industrial Production in the Eurozone experienced a deceleration from 1.8% to 1.1% YoY, outperforming the anticipated -0.2% contraction.
- 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.