EUR/USD Outlook: Fed’s Policy Easing and ECB’s Inflation Debate
- EUR/USD rises sharply above 1.1150: Investors anticipate continued aggressive policy easing by the Fed.
- Fed interest rates expected to decline to 4.4% by year-end: Policy measures aimed at stabilizing labor market conditions and inflation progress.
- ECB’s concern over inflation levels: Policymakers divided on easing pace due to mixed inflation outlook.
ECB Debate on Interest Rate Path
EUR/USD is on the rise, driven by the weakening US Dollar and uncertainty surrounding the Euro’s outlook. The European Central Bank (ECB) is facing a dilemma regarding the interest rate path due to conflicting views on inflation.
ECB Policymakers’ Stance
ECB members like Peter Kazimir and Joachim Nagel seek more evidence of inflation progress before committing to further rate cuts. Nagel supports maintaining high interest rates to address price pressures, while Isabel Schnabel highlights the impact of sticky services inflation on overall inflation levels.
On the other hand, François Villeroy de Galhau advocates for additional rate cuts to prevent inflation from falling too low. This debate follows the ECB’s recent interest rate cut decision, with expectations of another cut in upcoming meetings.
Daily Market Update: EUR/USD Climbs Above 1.1150
- EUR/USD surpasses 1.1150, driven by USD weakness after the Fed’s interest rate cut and expectations of further easing.
- Fed’s aggressive policy-easing cycle: Market anticipates additional rate cuts, with projections indicating a decline to 4.4% by year-end.
- Focus on Initial Jobless Claims data: Key economic indicator to watch for labor market conditions.
Technical Analysis: EUR/USD Recovery
EUR/USD shows signs of recovery above 1.1150, supported by bullish momentum and RSI levels nearing 60. Key resistance at 1.1200, with support at 1.1000 and 1.0950.
Economic Indicator: Interest Rate Projections
The Fed’s ‘dot-plot’ projections influence USD movements, with forecasts indicating potential rate cuts in upcoming meetings. Market reaction to these projections can impact trading strategies and currency valuations.
Stay informed on central bank decisions and economic indicators to make well-informed investment decisions and navigate market volatility effectively.