- EUR/USD reversed intraday losses after August US PCE inflation report was softer than expected.
- France's CPI preliminary figures (EU standards) and Spain's HICP in September were below 2% year-on-year.
- The ECB increased expectations for a rate cut in October after weaker-than-expected inflation data from France and Spain.
EUR/USD recovered most of its intraday losses in New York trading on Friday, moving back above 1.1150. Major currency pairs are paring losses as the US dollar (USD) retreats following the release of the August US Personal Consumption Expenditure Price Index (PCE). The index shows that inflation remains on track to return to the Bank's target of 2. %.
The US Dollar Index (DXY), which tracks the dollar's value against six major currencies, has retreated to around 100.40 and is falling towards key support at 100.20. The annual PCE inflation rate rose by 2.2%, slower than the 2.3% expected and the July figure of 2.5%, the report said. Core inflation, which excludes volatile food and energy prices, was expected to rise 2.7% from a year ago, up from a 2.6% rise in June. Month-on-month inflation statistics increased by 0.1%.
Signs that inflationary pressures are slowing further will raise market expectations that the Fed will cut rates further in the final quarter of the year. Financial markets now seem confident that the Fed will cut rates for the second time in a row in November, as inflation is on track to return to the Fed's 2% target and that policymakers are This is because they are concerned about increasing risks to demand. However, according to the CME FedWatch tool, traders are still evenly divided on the potential rate cut, between 25 and 50 bps.
Next week, investors will be watching Fed Chairman Jerome Powell's speech on Monday, a slew of labor market data, and the ISM Purchasing Managers' Index (PMI) to predict the dollar's next move.
USD price today
The table below shows the percentage change of the US dollar (USD) against major currencies today. The US dollar was the strongest against the Canadian dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.04% | -1.34% | 0.01% | -0.38% | -0.37% | -0.53% | |
| EUR | 0.06% | 0.01% | -1.29% | 0.03% | -0.32% | -0.32% | -0.45% | |
| GBP | 0.04% | -0.01% | -1.32% | 0.03% | -0.33% | -0.33% | -0.46% | |
| JPY | 1.34% | 1.29% | 1.32% | 1.39% | 1.03% | 1.02% | 0.91% | |
| CAD | -0.01% | -0.03% | -0.03% | -1.39% | -0.40% | -0.38% | -0.52% | |
| australian dollar | 0.38% | 0.32% | 0.33% | -1.03% | 0.40% | 0.01% | -0.13% | |
| new zealand dollar | 0.37% | 0.32% | 0.33% | -1.02% | 0.38% | -0.01% | -0.14% | |
| swiss franc | 0.53% | 0.45% | 0.46% | -0.91% | 0.52% | 0.13% | 0.14% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select USD from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents USD (base)/JPY (estimate).
Daily Digest Market Trends: EUR/USD recovers losses despite inflation slowing to below 2% in France and Spain
- EUR/USD pared some of its losses during European trading hours as the US dollar retreated. The euro (EUR) has been on the rise since the release of preliminary French Consumer Price Index (CPI) (EU standard) and Spanish Harmonized Index of Consumer Prices (HICP) data, which showed that the rise in price pressures was slowing. Performance relative to other major countries remains weak. September's pace exceeded expectations.
- Market expectations are rising that the European Central Bank (ECB) will cut interest rates again at its October meeting after inflationary pressures in France and Spain slowed sharply. This is the third rate cut by the ECB in the current policy easing cycle, which began in June. After keeping interest rates unchanged in July, the ECB lowered them again in September.
- France's annual CPI grew at a pace of 1.5%, significantly lower than the 1.9% expected and the previously announced 2.2%. On a month-on-month basis, price pressures fell at a solid pace of 1.2%, beating expectations of 0.8%. In Spain, annual HICP growth was 1.7%, slower than expected at 1.9% and 2.4% in August. Month-over-month, HICP declined 0.1%, but was expected to remain flat.
- Investors will now focus on the preliminary HICP figures for Germany and the euro area for September, to be released on Monday and Tuesday, respectively.
Technical analysis: EUR/USD recovers to around 1.1200
Since Tuesday, EUR/USD has held within a 100-pips range as investors look for new clues on Fed and ECB interest rates. The major currency pair remains firm as it maintains the breakout of the ascending channel chart pattern that formed on the daily time frame around the psychological support at 1.1000.
The 20-day exponential moving average (EMA) is sloping upwards around 1.1110, suggesting that the short-term trend is bullish.
The 14-day Relative Strength Index (RSI) is below 60.00, suggesting momentum is weakening.
Looking to the upside, a decisive break above the round-level resistance at 1.1200 will signal a further move towards the July 2023 high of 1.1276. On the downside, the main support zones will be the psychological level at 1.1000 and the July 17 high around 1.0950.
economic indicators
Core personal consumption expenditure – Price index (YoY)
Core personal consumption expenditure (PCE) is published by the government. U.S. Bureau of Economic Analysis Measures changes in the prices of goods and services purchased by United States (US) consumers on a monthly basis. The PCE price index is also the Federal Reserve's recommended measure of inflation. Measurements for the same month of the previous year compare the product prices of the base month with the same month of the previous year. Core values exclude so-called more volatile food and energy components to more accurately measure price pressures. ” In general, higher values are bullish for the US dollar (USD) and lower values are bearish.
