EUR/USD experiences moderate declines during the North American session on Friday as the US Dollar maintains strength following the release of mixed economic data and dovish remarks from Federal Reserve officials. The pair is currently at 1.1504, reflecting a decrease of 0.20%, following a dip to a two-week low of 1.1491.
The EUR/USD pair declines as robust US PMIs support the Greenback amidst heightened risk aversion. UoM sentiment has dropped significantly, nearing its record low, as consumers express frustration over inflation and income challenges. Despite the mixed signals from Fed officials, the markets are currently pricing in a 71% probability of a rate cut in December.
> The Euro declines by 0.20% as subdued US sentiment stands in contrast to stronger PMIs, leading to a rise in markets. December reduced probabilities : In November, the S&P Global Manufacturing and Services PMIs presented a mixed picture, yet they indicated an enhancement in business confidence. Additional data indicated that American households have adopted a pessimistic view regarding the economic outlook, as per reports. Consumer sentiment has reached its lowest point since 2009, reflecting ongoing frustration over elevated prices and declining incomes. Following the data release, the EUR/USD exhibited a subdued response, as market participants processed the varied remarks from several Federal Reserve officials. Dovish comments from New York Fed President John Williams and Governor Stephen Miran have heightened investor expectations for a 25-basis-point rate cut at the December meeting. In contrast, Boston Fed President Susan Collins and Dallas Fed President Lorie Logan advocated for a continued restrictive policy stance, indicating their support for leaving rates unchanged. In light of the current situation, market participants have assigned a 71% probability to a December rate cut, a significant increase from approximately 31% earlier in the day.
Latest FX Rate Trends : Euro declines despite the Federal Reserve’s accommodating stance
- New York Fed President John Williams indicated that policymakers might still consider rate cuts in the “near-term,” a statement that increased market expectations for a December adjustment. In alignment with that sentiment, Fed Governor Stephen Miran indicated that Thursday’s Nonfarm Payrolls data bolsters the case for a December rate cut, stating that if his vote were pivotal, he “would vote for a 25-bps cut.”
- Conversely, Dallas Fed President Lorie Logan statebankd that interest rates should be maintained at their current levels “for a time” as the Fed assesses the effects of existing policy on inflation, expressing that she finds it “difficult” to endorse a reduction in December. Boston Fed President Susan Collins concurred, emphasizing that a “restrictive policy is very appropriate right now.”
- The S&P Global Manufacturing PMI decreased to 51.9 in November, down from 52.5, slightly missing the consensus estimate of 52. The Services PMI increased to 55 from 54.8, surpassing expectations and indicating ongoing strength in the sector.
- The University of Michigan’s Consumer Sentiment Index increased in November to 51, up from a preliminary 50.3, surpassing expectations yet reflecting a decrease from October’s figure of 53.6. Inflation expectations showed signs of improvement, as the one-year outlook decreased to 4.5% from 4.7%, while the five-year measure declined to 3.4% from 3.6%.
- Reports shows that Nonfarm Payrolls for September increased by 119K, significantly surpassing the estimates of 50,000. Despite posting a robust figure, the Unemployment Rate increased from 4.3% to 4.4%, yet it stayed within the Federal Reserve’s forecasts.
- Speakers from the European Central Bank have made their statements public. Joachim Nagel expressed confidence that the central bank will successfully meet its inflation mandate. According to ECB Vice-President Luis de Guindos, the risks to growth are currently balanced, and the policy rate is deemed to be at an appropriate level.
- In November, Eurozone manufacturing activity experienced a decline, slipping back into contraction territory as the Manufacturing PMI decreased to 49.7 from October’s 50, falling short of expectations for an increase to 50.2. The Services PMI rose to 53.1, surpassing expectations of remaining at 53.