The Euro (EUR) strengthens against the US Dollar (USD) as the European Central Bank (ECB) cuts its Rate On Deposit Facility by 25 basis points (bps) to 3.50%. This move follows the ECB’s announcement on Thursday and the release of soft United States (US) Producer Price Index (PPI) data for August, causing the USD to weaken.
The ECB remains data-dependent for further monetary policy action, with President Lagarde refraining from providing a specific interest-rate cut path. Market participants anticipate one more interest rate reduction by the ECB as price pressures are expected to soften further in the Eurozone.
Daily Digest Market Movers: EUR/USD Gains as US Dollar Slides Further
- EUR/USD strengthens as market speculation for a 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) grows, leading to a decline in the US Dollar Index (DXY) to near 101.00.
- US PPI data for August shows slower-than-expected growth in producer inflation, prompting increased bets for a Fed rate cut in September.
- The preliminary Michigan Consumer Sentiment Index data for September will be closely watched by investors for insights into consumer spending trends.
Technical Analysis: EUR/USD Bounces Back Strongly from 1.1000
EUR/USD shows bullish momentum after retesting the breakout of a Rising Channel chart pattern near 1.1000. The currency pair has climbed above the 20-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) indicates potential for further bullish movement.
Key resistance levels for EUR/USD include 1.1155 and 1.1200, while major support zones are at 1.1000 and 1.0950.
Euro FAQs
- The Euro is the currency for the 20 European Union countries in the Eurozone and is the second most heavily traded currency in the world.
- The European Central Bank (ECB) manages monetary policy for the Eurozone, with a primary mandate of maintaining price stability.
- Eurozone inflation data, economic indicators, and trade balance all influence the value of the Euro in global markets.