The EUR/USD pair has declined for the second consecutive day, falling by 0.49%. This movement follows last Friday’s sell-off in metals, which bolstered the Greenback at the expense of the shared currency. The nomination of Kevin Warsh to lead the Federal Reserve, along with positive US economic data, contributed to a decline in the pair. Currently, the pair is trading beneath the 1.1800 level, set to conclude the day below this threshold.
The EUR/USD pair continues to decline as the recent sell-off in metals drives safe-haven investments towards the US Dollar. Robust ISM Manufacturing data supports the notion that the Federal Reserve is likely to postpone additional rate cuts. The Euro’s gains are limited, even with the positive news of improved German Retail Sales and a higher PMI, which still remains in contraction territory.
> The Euro experiences a decline for the second consecutive session, influenced by positive US economic data, expectations surrounding Fed leadership, and strong demand for the Dollar, which collectively exert pressure on the pair: The market sentiment showed signs of improvement on Monday; however, in the foreign exchange markets, traders continue to favor the US Dollar, which is recording a two-day increase exceeding 1.40%, as indicated by the US Dollar Index. The DXY, which assesses the dollar’s performance relative to a selection of other currencies, has increased by 0.46% to reach 97.60. The outlook for a Federal Reserve rate cut is waning as robust US economic data emerges. According to the Institute for Supply Management (ISM), there was an improvement in manufacturing activity in January. Meanwhile, the partial government shutdown in the US will hinder the dissemination of employment data, specifically concerning the Job Openings and Labor Turnover Survey, Initial Jobless Claims, and the Nonfarm Payrolls report for January. The releases are set to be postponed despite the approval of the government’s funding package by the US Congress. In addition to this, data from Europe showed an enhancement in German Retail Sales, while the HCOB Manufacturing PMI for January rose but continued to indicate contraction.
Latest FX Rate Trends: The Dollar makes a notable recovery following robust data
- The Institute for Supply Management Manufacturing PMI surged into expansion at 52.6 in January, significantly exceeding expectations of 48.5 and reversing December’s contraction of 47.9. Prices Paid increased for the 16th consecutive month, highlighting ongoing cost pressures. Employment, however, continued to contract, remaining below the 50 threshold—indicating that firms are still hesitant regarding hiring.
- The S&P Global Manufacturing PMI has indicated robust performance, increasing to 52.4 in January from a preliminary 51.9, representing the highest level since May 2022 and suggesting widespread enhancement in manufacturing operations.
- Last week’s inflation report on the producer side remained elevated, keeping factory prices close to the 3% threshold, suggesting that additional rate cuts might lead to a significant increase in prices. Therefore, the most recent Producer Price Index report supported the Fed’s decision.
- German Retail Sales experienced a smaller-than-anticipated increase in December, rising by 0.1% compared to the prior month, according to data released on Monday.
- This week, the European agenda includes the European Central Bank Lending Survey, inflation data for the region, Retail Sales figures, and the ECB’s monetary policy meeting.
- The upcoming schedule in the US includes the ADP Employment Change for January, along with the S&P and ISM Services PMIs, as well as speeches from Federal Reserve officials.