Forex Market Update

EUR/USD dipped to approximately 1.1600 during late Asian trading on Thursday. The major currency pairs are experiencing some selling pressure as the US dollar (USD) gains strength following a correction on Wednesday.

The U.S. Dollar Index (DXY), which measures the dollar’s value against six major currencies, has increased to almost 99.00.

Despite heightened worries about the trade relationship between the US and China, the dollar managed to rebound. Recently, Reuters reported that the US is planning to restrict software exports to Beijing in response to China’s limitations on rare earth minerals. Given that many products use this US software, these export controls could cover a broad range.

Domestically, investors are looking ahead to September’s Consumer Price Index (CPI) data, scheduled for release on Thursday. With several economic data releases stalled due to the ongoing government shutdown, many market participants will be particularly attentive to U.S. inflation figures.

The inflation data could significantly shape market expectations regarding the Federal Reserve’s (Fed) monetary policy. According to the CME FedWatch tool, traders seem confident that the Fed will decrease rates in the remaining policy meetings this year.

On the other hand, the euro (EUR) has been relatively stable, with expectations that the European Central Bank (ECB) will maintain deposit facility interest rates at 2% until the end of 2026. A recent Reuters poll conducted from October 15-22 indicated that 57% of economists believe the ECB will not adjust interest rates until 2027.

The euro could face its next major influence from the ECB’s monetary policy announcement, which is set for October 30th.