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- The EUR/USD pair reached the 1.1300 level for the first time in more than a year on Friday.
- Fed policymakers open door to rate cuts at Jackson Hole.
- Next week: Key inflation data from the EU and the US.
The EUR/USD pair rose to its second-best day in August, rising seven-tenths of a percent as the US dollar fell broadly. Market risk appetite was put on hold after Federal Reserve officials made their intentions widely known to investors, signaling that the US central bank is finally ready to start cutting interest rates.
Predicting the next week: Recession fears dominate Fed easing
According to CME’s FedWatch tool, interest rate markets are pricing in a two-way cut on September 18 by about three to one, with the rest of the Fed committed to a single quarter-basis-point cut. Bets on an inaugural 50 basis-point rate cut in September spiked after the Fed announced a 50 basis-point rate cut in September. Chairman Jerome PowellSpeaking at the Jackson Hole Economic Symposium on Friday, the Fed chairman frankly admitted that it is finally time for the U.S. central bank to start pushing benchmark interest rates lower.
Coming soon: EU and US inflation gauges loom late next week
Next week will start with remarkably quiet data, but key inflation data from both the EU and the US looms in the dark. US GDP growth figures will be a precursor on Thursday, but fibre traders will be mostly focused on the double-digit inflation report due next Friday.
Preliminary EU Harmonized Consumer Price Index (HICP) data for August will start rolling into the data calendar next Friday, and the figures are widely expected to show that key measures of inflation in the EU continue to slow towards the European Central Bank’s 2% annual target. European Central Bank (European Central Bank). On the American side, Consumption expenses Consumer price index (PCE) inflation is expected to remain above the Fed’s 2% target, with core PCE inflation for the year ending in July at or near 2.6% in the prior period.
EUR/USD Price Forecast
Despite some obstacles along the way, Fiber It hit a 13-month high on Friday, testing table Despite a strong uptrend in order flow, intraday price action struggled to hold the key price level, but ended the trading week with a solid 1.51% gain, one of the pair’s best weekly performances since November of last year.
EUR/USD bids continue to rise after the pair bounced from the lows to the 200-day EMA to rise to 1.0850. In the absence of a convincing break of 1.1300, bidders may see renewed short selling interest dragging the price action to the downside in the near term.
EUR/USD Daily Chart
Frequently Asked Questions About the Euro
The euro is the currency used in the twenty member states of the European Union that belong to the eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it will reach 1.2 trillion euros. It has been calculated. This pair accounts for 31% of all foreign exchange transactions, with an average daily trading volume of over $2.2 trillion per day. The EUR/USD currency pair is the most traded pair in the world, accounting To get a discount of around 30% on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank of the eurozone. The ECB sets interest rates and conducts monetary policy. The ECB’s primary mission is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates—or the expectation of higher interest rates—are generally good for the euro and vice versa. The Governing Council of the ECB makes monetary policy decisions at meetings held eight times a year. The decisions are made by the heads of the eurozone’s national banks and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices, is an important economic barometer for the euro. If inflation rises more than expected, especially if it is above the European Central Bank’s 2% target, it forces the ECB to raise interest rates to bring it back under control. The euro typically benefits from relatively high interest rates relative to its peers, as they make the region more attractive as a place for global investors to park their money.
Data released measures the health of the economy and can influence the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, it can encourage the European Central Bank to raise interest rates, which would directly boost the euro. Otherwise, if economic data is weak, the euro is likely to fall. Economic data from the four largest economies in the eurozone (Germany, France, Italy and Spain) is of particular importance, as they account for 75% of the eurozone economy.
Another important piece of data released by the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period of time. If a country produces highly demanded exports, its currency will gain value purely from the extra demand generated by foreign buyers seeking to purchase these goods. Thus, a positive net trade balance strengthens the currency and vice versa for a negative balance.
