- EUR/USD comes under pressure as the Euro weakens on firm ECB rate cuts prospects.
- The Eurozone’s weak economic outlook supports ECB rate cut bets for September.
- The US Dollar regains ground with US core PCE inflation data under the spotlight.
EUR/USD slumps from fresh highs of 1.1200 in Wednesday’s European session as the Euro (EUR) weakens. The Euro underperforms its major peers as investors seem confident that the European Central Bank (ECB) will cut interest rates again in September.
The ECB started reducing interest rates in June as policymakers appear confident that price pressures in the Eurozone will return to the bank’s target of 2% in 2025. However, it decided to leave its key borrowing rates unchanged in July as officials were worried that an aggressive policy easing process could revamp inflationary pressures again.
With evidence from Eurozone flash HCOB PMI for August and Q2 Negotiated Wage Rates that the overall economic outlook is uncertain and wage pressures are easing, the ECB is widely anticipated to reduce interest rates by 25 bps in September. Traders also see the ECB cutting borrowing rates again somewhere in the last quarter of this year.
For fresh cues on the interest rate cut path, investors await the flash Harmonized Index of Consumer Prices (HICP) data for August for Germany and the overall Eurozone, which will be published on Thursday and Friday, respectively. Economists expect that price pressures to have decelerated.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | -0.52% | -0.21% | -0.16% | -0.38% | -0.49% | -0.34% | -0.33% | |
| USD | 0.52% | 0.31% | 0.36% | 0.14% | 0.03% | -0.10% | 0.20% | |
| GBP | 0.21% | -0.31% | 0.04% | -0.17% | -0.28% | -0.14% | -0.12% | |
| JPY | 0.16% | -0.36% | -0.04% | -0.18% | -0.31% | -0.20% | -0.15% | |
| CAD | 0.38% | -0.14% | 0.17% | 0.18% | -0.11% | 0.03% | 0.05% | |
| AUD | 0.49% | -0.03% | 0.28% | 0.31% | 0.11% | 0.14% | 0.16% | |
| NZD | 0.34% | 0.10% | 0.14% | 0.20% | -0.03% | -0.14% | 0.02% | |
| CHF | 0.33% | -0.20% | 0.12% | 0.15% | -0.05% | -0.16% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: EUR/USD slides further as ECB rate-cut prospects weigh on Euro
- EUR/USD corrects to near 1.1150 in European trading hours. The major currency pair drops as the US Dollar (USD) regains ground after posting a fresh year-to-date (YTD) low this week. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher to near 100.80 from fresh lows of 100.50.
- A mild recovery in the US Dollar appears to be a short-lived pullback move for now, which could be capitalized as a selling opportunity by market participants. The near-term outlook for the Greenback is vulnerable on sheer optimism that the Federal Reserve (Fed) will start reducing interest rates in September.
- While Fed rate cuts in September have been fully priced in by traders, bets remain split over whether the central bank will cut interest rates gradually by 25 basis points (bps) or deliver a larger one of 50 bps. According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the likelihood of a 50-bps interest rate reduction in September is 34.5%, while the rest favors a cut by 25 bps.
- For fresh cues about the potential rate-cut size, investors await the United States (US) core Personal Consumption Expenditure Inflation (PCE) data for July, which will be published on Friday. The PCE Price Index report is expected to show that the annual core inflation rose by 2.7%, up from June’s reading of 2.6%, with monthly figures growing steadily by 0.2%. Signs of a further decline in the underlying inflation would prompt expectations for the Fed to adopt an aggressive policy-easing approach. On the contrary, sticky figures would dampen this jumbo rate-cut scenario.
Technical Analysis: EUR/USD drops below 1.1150
EUR/USD declines to near 1.1150 after posting a fresh swing high at 1.1200. The broader outlook of the major currency pair remains firm as it holds the breakout of the Symmetrical Triangle chart pattern formed on the weekly time frame. The upward-sloping 20-week Exponential Moving Average (EMA) near 1.0900 supports more upside ahead.
The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum. On the upside, the July 2023 high at 1.1275 and the January 2022 high of 1.1500 will be the next stops for the Euro bulls. The downside is expected to remain cushioned near the psychological support of 1.1000.
Economic Indicator
Core Personal Consumption Expenditures - Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Read more.Next release: Fri Aug 30, 2024 12:30
Frequency: Monthly
Consensus: 2.7%
Previous: 2.6%
Source: US Bureau of Economic Analysis
After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD slides toward 1.1100 as USD recovery continues
EUR/USD stays under bearish pressure and declines toward 1.1100 on Wednesday. In the absence of fundamental drivers, the cautious market mood allows the US Dollar to gather recovery momentum and forces the pair to stay on the back foot.
GBP/USD closes in on 1.3200 on renewed USD strength
GBP/USD is keeping the red and pushing lower toward 1.3200 on Wednesday, undermined by a broad US Dollar rebound. Markets turn anxious ahead of speeches from the BoE and the Fed policymakers later in the day.
Gold extends correction, tests $2,500
After closing the first two days of the week in positive territory, Gold struggles to hold its ground and tests $2,500. Renewed US Dollar strength and US Treasury bond yields' resilience makes it difficult for XAU/USD to shake off the bearish pressure.
FLOKI price is poised for a rally after breaking above the descending trendline
FLOKI price broke above the descending trendline and rallied 10%. At the time of writing on Wednesday, it continued its ongoing rally and trades 4.4% at $0.00015. Additionally, the suggestion of on-chain data supports the bullish trend, as evidenced by active, dormant wallets.
Three fundamentals for the week: Focus on the fragility of the US economy Premium
US Consumer confidence data will provide a gauge of how consumers are feeling. Jobless claims are in focus after Fed Chair Powell's dovish speech. Investors will look to the core PCE index to confirm that inflation is falling.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.