European Central Bank (ECB) and the Federal Reserve triggers a decline, propelling the EURUSD upwards.
On Monday, the Euro experienced a 0.18% surge, signifying its ascent for the week.
Implications for Traders The fortification of the Euro can be predominantly ascribed to the diminishing gap in the envisaged trajectory of interest rates between the United States and the Eurozone. A fortnight ago, the market was factoring in an approximate 80 basis points (bps) rate reduction by the Federal Reserve (Fed), in contrast to about 100 bps by the European Central Bank (ECB) by the culmination of the year. However, as of Monday, this gap nearly evaporated.
During a debate in the European Parliament, ECB President Christine Lagarde asserted yesterday: ‘Anticipated wage growth is poised to evolve into a progressively crucial impetus for the dynamics of inflation in the impending quarters.’ Additionally, she remarked: ‘Simultaneously, the contribution from profits <…> is waning, implying that as anticipated, increases in labor costs are somewhat cushioned by profits and are not entirely transmitted to consumers.’
Throughout the Asian and early European sessions, EURUSD maintained a relatively steady stance. Today’s occurrences are likely to kindle supplementary volatility in the Euro. Traders should direct their attention to two releases: U.S. Durable Goods Orders at 1:30 p.m. UTC and U.S. CB Consumer Confidence at 3:00 p.m. UTC. If the data signifies sustained frailties in the U.S. economy—subpar goods orders or diminishing consumer confidence—it will augment the likelihood of imminent rate reductions by the Fed, propelling EURUSD upwards. Conversely, EURUSD may undergo a sharp corrective downturn if the reports surpass expectations.