EUR/USD Strengthens Near 1.1125 in Asian Session
- The Fed Expected to Reduce Benchmark Interest Rate
- Investors Awaiting Eurozone HICP Data
The EUR/USD pair is trading stronger around 1.1125 during the Asian session on Wednesday. With the anticipation of a deeper rate cut by the US Federal Reserve (Fed), the major pair is receiving some support. The focus for investors today will be on the Eurozone Harmonized Index of Consumer Prices (HICP) data and the Fed’s monetary policy meeting.
Fed Rate Cut Expectations
The market is divided on whether the Fed will implement a rate cut of 25 or 50 basis points (bps). Futures on the Fed funds rate currently indicate a 60% chance of a 50 bps rate cut at the September meeting, up from 45% last Friday.
Boris Kovacevic from Convera in Vienna mentioned, “If they go for a 50-point cut, it could signal that the Fed has additional information suggesting higher recession risks than what investors are currently anticipating.”
US Economic Data
Recent data from the US showed unexpected positive results with Retail Sales rising 0.1% MoM in August and Industrial Production increasing by 0.8% MoM in the same month.
ECB Influence on Euro
The Euro has been supported against the USD due to less dovish interest rate guidance from European Central Bank (ECB) officials. The ECB has emphasized that future monetary policy decisions will be data-dependent.
Eurozone HICP Inflation Data
Investors will be closely watching the Eurozone HICP inflation data for August. The headline HICP is expected to show a 2.2% YoY increase, while the core HICP is estimated to rise by 2.8% in the same period.
Euro FAQs
Overview of the Euro
The Euro is the currency used in 20 European Union countries within the Eurozone. It is the second most traded currency globally, with an average daily turnover of over $2.2 trillion. The most traded currency pair is EUR/USD, followed by other pairs like EUR/JPY, EUR/GBP, and EUR/AUD.
Role of the European Central Bank (ECB)
The ECB, located in Frankfurt, Germany, is the central bank for the Eurozone. It manages monetary policy and sets interest rates to maintain price stability. The ECB Governing Council makes decisions on monetary policy eight times a year.
Economic Factors Impacting the Euro
- Eurozone inflation data, measured by HICP, influences ECB decisions on interest rates.
- Data releases such as GDP, PMIs, employment, and consumer surveys affect the Euro’s value.
- The Trade Balance indicator reflects a country’s exports and imports, impacting the currency’s strength.
Understanding these factors can help investors and individuals gauge the health of the Eurozone economy and make informed financial decisions.