The EUR/USD currency pair briefly returned to the 1.1100 level on Friday before market dynamics once again pressured the Euro, pulling it back to its opening values for the day. After a brief technical recovery midweek, the pair’s momentum faltered as traders now focus on the Federal Reserve’s upcoming rate decision next week.
Earlier this week, the European Central Bank (ECB) lowered its main refinancing rate from 4.25% to 3.65%, a reduction of 60 basis points. This cut initially provided a temporary boost to the Euro, but the momentum quickly dissipated as expectations for a Federal Reserve rate cut dominated global market sentiment. The CME’s FedWatch Tool indicates that traders are currently pricing in a 45% chance of a 50 basis point cut when the Federal Reserve meets on September 18.
In the United States, the University of Michigan’s Consumer Sentiment Index climbed to 69.0 in September, reaching its highest level in four months. This increase suggests a gradual improvement in consumer outlook on the US economy. However, the index also recorded a rise in 5-year Consumer Inflation Expectations to 3.1% from 3.0% in August, which may influence rate cut anticipations.
Additionally, US Export and Import Price Indexes for August showed a sharper decline than anticipated. The Export Price Index fell by 0.7%, exceeding the expected 0.1% drop, and reversing the previous month’s 0.5% increase. Similarly, the Import Price Index decreased by 0.3%, missing the expected 0.2% decline and down from the prior month’s 0.1% increase. These figures suggest easing inflation pressures in trade conditions.
EUR/USD Price Forecast: Despite a recent retreat from the 13-month highs near 1.1200 set in late August, the EUR/USD pair is encountering significant buying interest, preventing a decline back to the 50-day Exponential Moving Average (EMA) at 1.0984.
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