Daily digest market movers: EUR/USD rises as far right’s defeat improves Euro’s outlook
- EUR/USD moves higher and trades close to a fresh monthly high at 1.0900, posted on Thursday. The near-term outlook of the shared currency pair strengthens as investors expect that an interest rate cut by the Federal Reserve (Fed) in the September meeting is a done deal.
- According to the CME FedWatch tool, the central bank is certain to cut interest rates in September and is also expected to deliver a subsequent rate cut in the November or December meeting. The expectations for Fed rate cuts have been prompted by the United States (US) Consumer Price Index (CPI) data for June, published on Thursday, which indicated that the disinflation process has resumed after a hiatus in the first quarter of this year.
- Annual core inflation, which is generally considered by Fed officials for decision-making on interest rates as it excludes volatile food and energy items, unexpectedly decelerated to 3.3%. Economists expected the underlying inflation to have increased steadily by 3.4%. The headline inflation rose to 3.0%, the lowest reading in a year, due to easing energy prices and rentals. Monthly headline inflation deflated by 0.1% after remaining unchanged in May.
- Cooling US inflationary pressures and easing labor market conditions have increased Fed officials’ confidence that inflation is on course to return to the desired rate of 2%. San Francisco Fed President Mary Daly said on Thursday that a slowdown in inflationary pressures is a “welcome relief” and bolsters the case for lower interest rates. However, the timing remains a matter of debate, Reuters reported.
- Improving Fed rate cut expectations is an unfavorable situation for the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, seems vulnerable near 104.40.
- Meanwhile, investors await the US Producer Price Index (PPI) data for June, which will be published at 12:30 GMT. Producer inflation is expected to have grown at a higher pace on a monthly as well as annual basis
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