EUR/USD is settling around 1.0785, assessing the market impact of this week's events. With Donald Trump’s return as US President, the market is recalibrating expectations around inflation and economic policies that his administration may reintroduce.
Trump’s protectionist stance could stir inflationary pressures, prompting the Federal Reserve to maintain higher interest rates than anticipated. This potential for elevated rates is boosting the dollar’s appeal.
Yesterday, the Federal Reserve cut interest rates by 25 basis points to 4.75% in line with market predictions. The Fed’s commentary suggested no deviations from its planned rate trajectory, hinting at continued easing.
Looking ahead, another rate reduction of 25 basis points is expected at the Fed’s December meeting, continuing its cautious but steady approach to monetary easing.
Technical analysis of EUR/USD
The EUR/USD pair has completed a bullish move towards 1.0820, as part of an ongoing upward impulse. Current market behaviour suggests a retracement to 1.0758 before resuming its ascent towards 1.0833. This outlook is supported by the MACD indicator, which, although below zero, is trending upwards, signalling a potential bullish continuation.
The hourly frame shows EUR/USD undergoing a corrective phase to 1.0758. Upon reaching this level, a rebound to 1.0833 is expected, followed by another potential pullback to 1.0758. The stochastic oscillator supports this outlook, with its signal line poised to rise towards 80, suggesting increasing bullish momentum.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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