The Euro continues to decline against the US Dollar on Tuesday, as increased demand for the Greenback exerts pressure on the currency pair. At this moment, EUR/USD stands around 1.1481, indicating a persistent decline for the fifth consecutive day. Meanwhile, the US Dollar Index is trading consistently around 100.20, reaching a new three-month high against a basket of six major currencies. The Euro is experiencing a drop for the fifth straight day as increased demand for the Greenback dominates the FX markets. The careful stance of Fed Chair Powell bolsters the US Dollar as market players recalibrate their outlook for a rate reduction in December. Focus shifts to the ADP Employment Change and ISM Services PMI in the United States, as well as the HCOB Services PMI and September PPI in the Eurozone.
The Euro’s decline seems mainly driven by a renewed interest in the Greenback, with little backing coming from the Eurozone itself. The lack of major economic data has allowed the single currency to be swayed by broader movements in the US Dollar. Across the Atlantic, traders are adjusting their outlook for another interest rate cut at the December meeting after Federal Reserve Chair Jerome Powell suggested last week that a further reduction is “not a foregone conclusion” following the 25-basis-point interest cut. Powell mentioned that “there’s an increasing number” within the Committee supporting the idea of delaying a reduction going forward.
The shift in market expectations has greatly influenced the recent strength of the US Dollar, as participants reevaluate the chances of a prolonged higher interest rate scenario. However, varying viewpoints among Fed officials about the ongoing nature of inflation and signs of softness in the labor market lead to an unclear forecast for monetary policy. In the upcoming days, market participants will focus on the ADP Employment Change and ISM Services Purchasing Manager Index reports set to be released on Wednesday, as these will offer fresh insights into the US labor market and service-sector performance.
The ongoing government shutdown is leading to delays in the release of official data, which in turn heightens the importance of private-sector indicators. The ADP report is anticipated to offer initial perspectives on hiring activity and general trends in the labor market. In the Eurozone, attention will turn to the HCOB Services PMI and the September Producer Price Index.