- EUR/USD attracts some buyers on Thursday amid a modest USD pullback from a three-month high.
- Expectations for a less aggressive policy easing by the Fed should help limit losses for the Greenback.
- Bets for a jumbo ECB rate cut in December might undermine the Euro and cap the upside for the pair.
The EUR/USD pair gains some positive traction during the Asian session on Thursday and for now, seems to have snapped a three-day losing streak to its lowest level since early July, around the 1.0760 area touched the previous day. Spot prices climb back closer to the 1.0800 mark in the last hour amid a modest US Dollar (USD) downtick, though the fundamental backdrop warrants some caution for bullish traders.
The US Treasury bond yields retreat from a three-month high prompt some USD profit-taking following the recent strong rally to the highest level since late July. That said, growing acceptance that the Federal Reserve (Fed) will proceed with modest rate cuts, along with investors' nervousness ahead of the US Presidential election on November 5, should act as a tailwind for the safe-haven Greenback. Apart from this, dovish European Central Bank (ECB) expectations should keep a lid on any meaningful appreciating move for the EUR/USD pair.
The annual inflation rate in the Eurozone fell to 1.7% in September, below the ECB’s 2% target for the first time since June 2021. This validates the central bank's view that the disinflationary process is well on track and supports prospects for further policy easing. Moreover, ECB Mario Centeno said on Wednesday that downside risks dominate growth and inflation and that a 50 basis points (bps) rate cut in December is on the table. Moreover, ECB's Bostjan Vasle said that recent data presents some risks that might delay the expected improvement in growth.
This, in turn, might hold back traders from placing aggressive bullish bets around the shared currency and cap the upside for the EUR/USD pair. Market participants now look to the release of the flash PMI prints from the Eurozone and the US, which might provide fresh insight into the health of the global economy and in turn, influence the broader risk sentiment. Apart from this, the US bond yields will drive the USD and provide some impetus. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.
Economic Indicator
HCOB Composite PMI
The Composite Purchasing Managers’ Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging private-business activity in the Eurozone for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for EUR.
Read more.Next release: Thu Oct 24, 2024 08:00 (Prel)
Frequency: Monthly
Consensus: 49.7
Previous: 49.6
Source: S&P Global
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 holds steady above 1.0800, looks to post weekly losses
EUR/USD trades marginally higher on the day above 1.0800 after the data from the US showed that Durable Goods Orders declined by 0.8% in September. Nevertheless, the pair remains on track to close the fourth consecutive week in negative territory.
GBP/USD extends recovery to 1.3000 area
GBP/USD extends its recovery and trades at around 1.3000 in the American session on Friday. The US Dollar struggles to gather strength as the market mood remains positive heading into the weekend, allowing the pair to hold its ground.
Gold fluctuates in narrow range below $2,750
Gold stays in a consolidation phase and fluctuates in a relatively tight range below $2,750 on Friday. US Treasury bond yields stabilize in the American session, making it difficult for XAU/USD to gather directional momentum.
Crypto Today: XRP, Bitcoin and Ethereum decline as Ripple files response to SEC appeal
XRP loses over 1.30% as Ripple's executive confirms the filing of an important document in the appeals process in the SEC lawsuit. Bitcoin corrects less than 1% and sustains above $67,500. Ethereum is down nearly 0.20%, holding above the key support level of $2,500.
US elections: The race to the White House tightens
Trump closes in on Harris’s lead in the polls. Neck and neck race spurs market jitters. Outcome still hinges on battleground states.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.