Market Update
- EUR/USD shows signs of recovery from intraday low but remains under pressure.
- Consumer sentiment, according to UOM, falls to 55.4, missing expectations and hitting a four-month low.
- Zapad-2025 military drills initiated by Russia and Belarus, prompting Poland to close its border with Belarus.
The euro (EUR) is trading on the defensive against the US dollar (USD) this Friday. The EUR/USD is currently around 1.1720, having dipped to an intraday low near 1.1700. A slight rebound is noted, particularly as the dollar eases from its session high.
This shift follows an initial consumer confidence survey from the University of Michigan, which indicated a drop in consumer sentiment, compounded by persistent inflation concerns.
The consumer sentiment index fell to 55.4 for September, which is below the anticipated 58 and represents a decline from August’s 58.2, marking its lowest point since May. The expectations index dropped from 55.9 to 51.8, falling short of the expected 54.9. Meanwhile, the current conditions gauge eased from 61.7 to 61.2.
Regarding inflation, expectations for the next year remain steady at 4.8%, but the five-year outlook increased from 3.5% to 3.9%, reflecting growing worries over long-term price stability. This data underscores that US households are becoming increasingly anxious about the economic situation, especially with high inflation predictions.
The US Dollar Index (DXY), which compares the dollar to a basket of six major currencies, has retreated from a daytime high of 97.86, with current levels around 97.67. Despite this decline, the index remains strong, limiting the euro’s recovery opportunities.
Looking across to Europe, the euro faces its own hurdles. The European Central Bank (ECB) maintained its stance during a meeting on Thursday, highlighting caution amid lackluster growth and mild inflation.
On another note, the security situation in Eastern Europe has worsened. Approximately 19 drones entered Polish airspace at the start of the week, and on Friday, Russia and Belarus embarked on the large-scale Zapad-2025 military exercises. In light of these developments, Poland has closed its border with Belarus and increased troop deployment to about 40,000 at its eastern border.
