EUR/USD drops to near 1.0550 in the European trading session on Thursday after posting a fresh weekly low near 1.0590 on Wednesday. The major currency pair faces pressure as the US Dollar (USD) manages to gain temporary ground in a thin volume trading day amid a long weekend in the United States (US) economy on account of Thanksgiving Day.
The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, discovers an interim cushion around 106.00 on Thursday after a sharp downside move on Wednesday. The Greenback will be influenced by market expectations for the Federal Reserve’s (Fed) likely interest rate action in the December meeting as the US economic calendar has nothing to offer.
Traders see a 66% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50% next month, according to the CME FedWatch tool. Fed rate cut prospects remain firm even though the US Personal Consumption Expenditure Price Index (PCE) data for October grew expectedly. Annual core PCE Price Index, a Fed’s preferred inflation gauge – which excludes volatile food and energy prices – rose by 2.8%, faster than 2.7% in September.
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