The EUR/USD pair faced some downward pressure during Thursday’s Asian session, retreating from its recent highs around 1.0870, a peak not seen in one and a half weeks. The decline can be attributed to renewed dip-buying of the US Dollar (USD), which pulled the exchange rate back into the mid-1.0800s.
Recent US economic data continues to signal a resilient economy, reinforcing expectations for a less aggressive easing of monetary policy by the Federal Reserve. Notably, the ADP reported on Wednesday that private-sector employers added 233,000 jobs in October, suggesting that increased employment will enhance consumer spending and overall economic growth. This supports the notion that the Fed may opt for smaller rate cuts moving forward.
Additionally, an initial estimate from the US Bureau of Economic Analysis revealed a 2.8% annualized growth rate for the economy in the third quarter, slower than the previous quarter’s 3% growth. However, this did little to alter expectations regarding the Fed’s rate-cut trajectory. Concerns over a growing US fiscal deficit are pushing Treasury bond yields higher, helping the USD maintain its strength after reaching a three-month high, which has put pressure on the EUR/USD pair.
On the Eurozone front, data released on Wednesday highlighted persistent inflationary pressures in Germany. The German economy, the Eurozone’s largest, unexpectedly grew by 0.2% quarter-on-quarter in the third quarter. This development has prompted investors to reassess their expectations for significant rate cuts by the European Central Bank (ECB), potentially offering some support for the euro ahead of the upcoming flash Eurozone consumer inflation figures.
Looking ahead to the early North American session, the release of the US Personal Consumption Expenditure (PCE) Price Index is anticipated to provide further insights into the Fed’s interest rate outlook and influence US bond yields. Additionally, broader market sentiment will likely impact demand for the safe-haven USD, creating short-term trading opportunities for the EUR/USD pair.
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