EUR/USD Climbs Over 1.1100 Amid Rate Cut Speculations
- Market Sentiment: Risk-on sentiment prevails as investors anticipate rate cuts from the Federal Reserve.
- Economic Calendar: EU data remains light, putting the focus on the upcoming Fed rate decisions.
- Fed Rate Cuts: The Fed is expected to initiate rate cuts this week, with multiple cuts projected by year-end.
EUR/USD witnessed an uptick on Monday, propelled by selling pressure on the US Dollar, pushing the pair back above the critical 1.1100 level that had constrained price action last week. With optimism prevailing in the markets, eyes are now on the Federal Reserve (Fed) and its anticipated rate-cutting stance.
Despite a lackluster economic calendar in the EU, attention shifts to the US central bank’s upcoming decisions, with the potential for significant market movements based on the Fed’s actions.
Forex Market Outlook:
US Retail Sales data is on the horizon for Tuesday, although expectations are modest, barring any surprise deviations from forecasts. The month-on-month growth in US Retail Sales for August is projected to slow to 0.2% from July’s 1.0%, while core Retail Sales (excluding auto purchases) are forecasted to dip to 0.3% from 0.4%.
The Fed’s commencement of a new rate-cutting cycle is almost a certainty, with the focus shifting to the extent of the cuts rather than the timing. Market sentiment indicates a high probability of a 50 basis points (bps) rate reduction in the Fed funds rate, with expectations of total cuts ranging from 125-150 bps by year-end.
EUR/USD Price Forecast
Monday’s bullish momentum pushed EUR/USD above 1.1100, but long-term bullish sentiment remains cautious. The chart reflects a technical standoff following a retreat from recent highs, with limited upward momentum despite a bounce from the 1.1000 level last week.
EUR/USD Daily Chart
Euro FAQs
- EUR Overview: The Euro is the currency for 20 EU countries, with significant global trading volume.
- ECB Role: The European Central Bank (ECB) manages monetary policy and interest rates for the Eurozone.
- Inflation Impact: Eurozone inflation data influences ECB decisions and the Euro’s value.
- Economic Indicators: GDP, PMIs, employment data, and consumer sentiment affect the Euro’s direction.
- Trade Balance: Positive trade balance strengthens the Euro, reflecting export demand.
Understanding the Euro and its interplay with economic indicators and global factors is crucial for assessing market trends and potential impacts on currency pairs like EUR/USD.