EUR/USD Trends Downward Amid Strong Dollar
The EUR/USD pair continued its downward trend for the third straight session, trading at approximately 1.1640 during Asian hours on Thursday. This decline can be attributed to the strengthening of the U.S. dollar, boosted by better-than-expected results in the producer price index (PPI) and retail sales. Additionally, a decrease in the unemployment rate last week reinforced the Federal Reserve’s intent to maintain interest rates for the foreseeable future. Traders are now looking ahead to a report on new jobless claims in the U.S., which is expected later in the day.
Retail sales for November increased by 0.6% to reach $735.9 billion, as reported by the U.S. Census Bureau on Wednesday. This figure exceeded expectations, which had predicted a more modest 0.4% rise, especially following a slight decline of 0.1% in October. The PPI also showed favorable performance, with both the composite and core indices registering a 3% year-on-year increase. In light of this, analysts at Morgan Stanley have revised their expectations for interest rate cuts, pushing them from January and April to June and September after the latest jobs report.
During a speech at the Midwest Economic Forecast Forum, held online by the Wisconsin Bankers Association, Minneapolis Fed President Neel Kashkari remarked that the economy appears resilient. He highlighted that the pass-through of tariffs is lower than anticipated. Despite current inflation levels being high, Kashkari noted that there’s a positive trend in the right direction.
The euro remains subdued against the dollar, even after cautious comments from European Central Bank (ECB) officials suggesting that they are eager to increase interest rates.
Luis Deguindos, Vice President of the ECB, stated on Wednesday that the current market pricing doesn’t fully reflect the significant global uncertainties, warning that geopolitical risks heighten the potential downsides for growth.
Merja Kallio, Governor of the Bank of Latvia and a member of the ECB’s Governing Council, mentioned that the outlook risks appear balanced but stressed that uncertainties persist, including the chance of non-linear disruptions. She noted that the ECB is meeting its inflation targets and remains steadfast in its approach.
