The EUR/USD pair has broken a four-day losing streak, trading around 1.0840 during the Asian session on Friday. This rebound comes as the U.S. Dollar (USD) reached a two-month high of 103.87 on Thursday, buoyed by strong U.S. Retail Sales data that intensified expectations of potential rate cuts by the Federal Reserve (Fed).
According to the CME FedWatch Tool, there is a 90.8% probability of a 25 basis point rate cut in November and a 74.0% chance of an additional cut in December. U.S. Retail Sales rose by 0.4% month-over-month in September, surpassing the 0.1% increase recorded in August and exceeding market expectations of 0.3%. Additionally, Initial Jobless Claims dropped by 19,000 during the week ending October 11, marking the largest decline in three months and bringing the total to 241,000—well below the anticipated 260,000.
Conversely, the Euro is facing downward pressure following the European Central Bank‘s (ECB) policy decision on Thursday. The ECB lowered its Main Refinancing Operations Rate and the Deposit Facility Rate by 25 basis points to 3.40% and 3.25%, respectively, marking the first back-to-back rate cuts by the ECB in 13 years. This decision was prompted by a notable decline in inflation, which fell from a peak of 10.6% in October 2022 to 1.7% in September, below the ECB’s 2% target.
During the post-meeting press conference, ECB President Christine Lagarde left markets uncertain regarding the timing of future rate cuts, while affirming that the Eurozone economy is on track for a soft landing.
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