- EUR/USD holds steady around 1.0850, buoyed by positive Eurozone GDP growth and rising German inflation.
- ECB President Lagarde anticipates further interest rate cuts and expresses optimism about inflation reaching the bank’s 2% target.
- The US Dollar is set to be affected by the upcoming presidential election, Nonfarm Payrolls (NFP), and ISM Manufacturing PMI data.
EUR/USD remains steady near 1.0850 during Thursday’s European session, following a sharp recovery on Wednesday. The currency pair gained traction as traders scaled back expectations for a significant interest rate cut from the European Central Bank (ECB) in December, thanks to better-than-anticipated Eurozone GDP growth and rising German inflation.
On Wednesday, Eurostat reported a 0.9% increase in Eurozone GDP for Q3 year-over-year, with Germany's economy unexpectedly growing by 0.2% instead of the anticipated 0.1% contraction, thereby avoiding a technical recession. Meanwhile, growth in Spain exceeded forecasts, while France's growth met expectations and Italy's was below projections.
The German flash Harmonized Index of Consumer Prices (HICP) for October rose 2.4% year-over-year, surpassing estimates of 2.1% and up from 1.8% in the prior release, indicating that inflation pressures persist. Analysts at ING noted that this latest inflation data may lead some ECB members to rethink their recent rate cuts and the bank's willingness for more aggressive reductions.
Investors will be watching for the Eurozone's flash HICP data for October, set to be released at 10:00 GMT, for further insights into inflation trends. In an interview with French newspaper Le Monde, ECB President Christine Lagarde expressed confidence in addressing price pressures, stating, “The objective is in sight, but I am not going to tell you that inflation is under control.” While she reaffirmed her commitment to reducing interest rates, she did not specify a rate cut path.
Daily Digest: Market Movers - EUR/USD Steady as U.S. Dollar Faces Pressure
- EUR/USD holds steady near 1.0850, bolstered by positive Eurozone GDP data. While stronger growth has enhanced the appeal of the Euro (EUR), its outlook remains precarious due to uncertainties surrounding the upcoming U.S. presidential election.
- Traders appear to be anticipating a victory for former President Donald Trump over current Vice President Kamala Harris, a scenario that could significantly impact the Eurozone economy, as Trump is likely to impose a 10% tariff increase on all imports. He recently stated that the European Union (EU) would "pay a big price" for not purchasing enough American exports if he wins the election on November 5, according to Reuters.
- Meanwhile, the U.S. Dollar (USD) is on the decline, as investors focus on upcoming U.S. Nonfarm Payrolls (NFP) and ISM Manufacturing PMI data for October, scheduled for release on Friday. These economic indicators will shape market expectations regarding the Federal Reserve's interest rate decisions. Additionally, the Personal Consumption Expenditure (PCE) Price Index data for September will be released later on Thursday, although its market impact is anticipated to be minimal since the U.S. GDP report already provided overall Q3 figures.
- The ADP's private employment gauge indicates improving job market conditions, reporting a solid labor demand with 233,000 new hires in October compared to 159,000 in September.
Technical Analysis: EUR/USD Seeks Further Upside Above 1.0850
EUR/USD is trading near a fresh one-week high around 1.0850 during European trading hours. The major currency pair has maintained its recent recovery after breaking above the key resistance level of 1.0800. However, its overall outlook remains bearish as it trades below the 200-day Exponential Moving Average (EMA) around 1.0900.
The 14-day Relative Strength Index (RSI) has climbed to approximately 42.00, after spending nearly a month within the 20.00-40.00 range, indicating that the bearish momentum may be losing strength.
Looking ahead, the pair could potentially rise towards the 200-day EMA near 1.0900 and the September 11 low around 1.1000. On the downside, the upward-sloping trendline near 1.0750, drawn from the April 16 low around 1.0600, serves as a crucial support level for Euro bulls.
