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18/10/24
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EUR/USD Rebounds as US Retail Sales Strengthen Dollar Ahead of Fed Rate Cuts
The EUR/USD currency pair saw a modest revival, appreciating to approximately 1.0840 during the Asian trading session on Friday, marking an end to a four-day decline. This uptick comes despite a stronger performance by the US Dollar, which achieved a two-month peak at 103.87 on Thursday, driven by robust US Retail Sales figures. The recent data indicated a 0.4% increase in retail sales for September, outpacing both the previous month’s gain of 0.1% and expectations of a 0.3% rise. Additionally, initial jobless claims dropped substantially, by 19,000, indicating a resilient labor market, further supporting the dollar’s strength.
Market sentiment now anticipates potential rate cuts by the Federal Reserve, with the CME FedWatch Tool suggesting a 90.8% likelihood of a 25-basis-point cut in November and a 74.0% chance for December. As the market absorbs these positive retail figures, there remains a cautious optimism that the Fed may ease monetary policy soon.
Conversely, the Euro has faced downward pressure following the European Central Bank’s (ECB) recent policy decisions. The ECB lowered its Main Refinancing Operations Rate and Rate on Deposit Facility by 25 basis points, bringing the latter down to 3.25%. This marks the first consecutive rate cut by the ECB in over a decade, a response to falling inflation figures, which have significantly dropped from a peak of 10.6% in October 2022 to 1.7% in September.
During a recent press conference, the ECB President conveyed an uncertain outlook regarding future rate adjustments, although she indicated that the Eurozone economy is trending towards a soft landing. As a result, traders remain vigilant regarding ongoing economic indicators that may influence currency valuations in the near term.
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