EUR/USD faces downward pressure due to softer inflation data
- EUR/USD falls below 1.1150 as French and Spanish inflation data disappoint
- Expectations of ECB rate cut in October rise as price pressures slow down
- Market awaits US core PCE inflation data for further Fed rate guidance
EUR/USD is experiencing a decline below 1.1150 in the European session today. The major currency pair is under significant selling pressure as the Euro weakens following the release of softer-than-expected inflation data from France and Spain. The flash French Consumer Price Index (CPI) (EU Norm) and Spain Harmonized Index of Consumer Prices (HICP) data both indicate a slower growth in price pressures for September.
With the sharp deceleration in inflation rates in France and Spain, market sentiment is leaning towards the possibility of the European Central Bank (ECB) cutting interest rates once again in their upcoming October meeting. This would mark the third rate cut in the current policy-easing cycle that began in June. The ECB had left interest rates unchanged in July before reducing them in September.
Key highlights from the inflation data:
- French annual CPI grew at 1.5%, lower than expected 1.9%
- Spain’s annual HICP rose by 1.7%, slower than estimated 1.9%
- On month, French prices deflated by 1.2% and Spanish HICP declined by 0.1%
Looking ahead, investors will be closely monitoring the preliminary German and Eurozone HICP data set to be released early next week.
Market movers: USD strength ahead of US core PCE inflation data
- USD gains traction as investors anticipate US core PCE inflation figures
- PCE data to impact Fed’s interest rate outlook for the final quarter
- Market divided on potential size of Fed rate cut in November
The US Dollar is on the rise, putting pressure on EUR/USD, ahead of the release of the US Personal Consumption Expenditures Price Index (PCE) for August. This data will play a crucial role in shaping market expectations regarding the Federal Reserve’s interest rate stance for the coming months. The US Dollar Index (DXY) is hovering near 100.65, within a range of 100.20-101.40 over the past two weeks.
Key points to note:
- Expected core inflation rate to increase to 2.7% year-on-year
- Market confidence in Fed’s potential rate cut in November
- Focus on upcoming labor market data and Fed Chair Powell’s speech
Technical Analysis: EUR/USD trend analysis
EUR/USD is currently consolidating within a 100-pip range as investors await further guidance on interest rate policies from the Fed and ECB. The major currency pair remains steady above the psychological support level of 1.1000, indicating a bullish trend in the near term.
Key technical indicators:
- 20-day Exponential Moving Average (EMA) suggests a bullish trend
- RSI below 60.00 indicates weakening momentum
Future price movements:
- Break above 1.1200 could lead to further appreciation towards 1.1276
- Support levels at 1.1000 and 1.0950
Euro FAQs: Understanding the Euro and its impact
The Euro is the official currency of the Eurozone, comprising 20 European Union countries. It is the second most traded currency globally, with EUR/USD being the most heavily traded currency pair. The European Central Bank (ECB) plays a pivotal role in managing the Eurozone’s monetary policy, focusing on maintaining price stability and economic growth.
Key factors affecting the Euro:
- Inflation data and ECB interest rate decisions
- Economic indicators like GDP, PMIs, and trade balance