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28/11/24
37
EUR/USD Slide as US Dollar Strengthens Amid Fed Rate Speculation
The EUR/USD currency pair is facing downward pressure as the US Dollar makes gains, largely influenced by a cautious sentiment surrounding the Federal Reserve’s potential interest rate cut in December. Recent data from the United States revealed a notable increase in consumer spending for October, which has added fuel to this cautious approach. In contrast, inflation trends in the Eurozone are expected to show growth, complicating the outlook for the Euro.
During the Asian trading hours on Thursday, the EUR/USD dipped to approximately 1.0550. This movement is largely attributed to the strengthening US Dollar, which has gained traction amidst a vigilant atmosphere related to the Federal Reserve’s upcoming interest rate decisions. The anticipation of thin trading volumes is prevalent due to the approaching US Thanksgiving holiday, suggesting that market movements may see reduced volatility.
The latest inflation report from the US indicates a robust growth trajectory in consumer spending, raising concerns about the pace of inflation reduction. The Personal Consumption Expenditures (PCE) Price Index experienced an annual increase of 2.3% in October, an uptick from the previous month’s 2.1%. Furthermore, the core PCE Price Index, which excludes the more erratic food and energy sectors, rose by 2.8%, slightly above September’s figure of 2.7%.
Futures traders are adjusting their expectations, now estimating a 68.1% probability that the Fed will enact a quarter-point rate cut in December, up from 59.4% just a day earlier. However, predictions indicate that the Fed may maintain current rates during its meetings in January and March.
In Europe, the Euro is facing challenges as officials from the European Central Bank highlight concerns regarding economic growth in the Eurozone. A rate cut is anticipated in December, but forecasts regarding the extent of this reduction remain mixed. Traders are preparing for the release of the Eurozone’s Harmonized Index of Consumer Prices (HICP) inflation data, with preliminary estimates suggesting annual increases in both headline and core inflation rates, potentially intensifying market apprehensions.
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