The Euro experiences a decline in the North American session, decreasing by over 0.10% as the Dollar rebounds from the losses incurred on Tuesday. Robust US business activity data presents a challenge for the EUR/USD pair. The recent inflation report from the Eurozone, which came in softer than anticipated, raises the likelihood that the European Central Bank may consider reducing rates to boost economic activity. Currently, the EUR/USD is positioned at 1.1800.
The EUR/USD experiences a decline in response to robust US services data. The PMI data reinforces the strength of the Dollar, even in light of emerging weaknesses in the labor market. The decline in Eurozone HICP inflation enhances the likelihood of a rate reduction by the European Central Bank. Attention shifts to the ECB’s decision and comments from Christine Lagarde regarding the policy outlook and the strength of the Euro.
> The Euro is slightly declining, hovering around 1.1800, as strong US economic activity stands in contrast to the softening inflation pressures in the Eurozone: The US economic report included the Institute for Supply Management Purchasers Management Index for the services sector, which surpassed expectations in light of rising input costs. Additional data indicates that private companies have added fewer employees than economists anticipated, suggesting a potential weakness in the labor market. The brief US government shutdown has impacted the dissemination of essential employment statistics. The release of the JOLTS report, initially anticipated for today, has been rescheduled to February 5. In the interim, the Nonfarm Payrolls report is scheduled for release on February 11, whereas the Consumer Price Index has been rescheduled to February 13. In the European market, the Harmonized Index of Consumer Prices for January came in below expectations at 1.7% year-over-year, with core metrics recorded at 2.2% year-over-year. The rise in Eurozone headline inflation has heightened the likelihood of a rate cut, as opposed to an increase, for the ECB. Traders are closely monitoring the outcome of the ECB’s monetary policy, as well as the press conference led by President Christine Lagarde. It would be significant if she addressed the Euro’s strength, influenced by the prevailing weakness of the US Dollar.
Latest FX Rate Trends: Positive US data impacts the Euro
- The January reading of the Institute for Supply Management Services PMI exceeded expectations, reducing the likelihood of imminent rate cuts. The index increased to 53.8, surpassing the anticipated 53.5 and aligning with December’s figure.
- The ISM Employment Index sub-component experienced an increase for the second consecutive month, although the rate of growth was slower compared to December. Meanwhile, the Prices Paid Index saw a rise to 66.6 from 65.1, reaching its highest point in two months.
- The US ADP Employment Change report for January indicated that private-sector payrolls rose by only 22K, significantly below the anticipated increase of 48K.
- The US President Donald Trump stated that he had a productive telephone conversation with President Xi of China. Trump announced plans to travel to China in April, highlighting discussions on trade, military matters, Taiwan, the Russia/Ukraine conflict, Iran, and China’s procurement of oil and gas from the United States.
- The US Treasury Secretary Scott Bessent stated that a strong Dollar policy is in the nation’s interest. When inquired about Trump’s authority to dismiss the Fed chair or a board member due to policy disagreements, he stated that he holds no opinion on the matter.
- Data from Prime Market Terminal indicates that money markets have factored in 47 basis points of Federal Reserve easing by the end of the year.
- On Thursday, the ECB is anticipated to maintain current rates. Nonetheless, firms disclosing a downturn in profits, as indicated in the recent ECB safety survey, heighten the likelihood that the forthcoming decision on interest rates will lean towards a reduction rather than an increase.