Nov 29, 2023

EURUSD has German inflation and US GDP data ahead as it advances.


EURUSD – Daily Chart

EURUSD trades at 1.0990 and will look to test the 1.10 level with resistance higher at the 1.25 level. 

The USD traded at a three-month low against major currencies on Tuesday as traders adjusted positions in anticipation of US and Eurozone inflation data. The dollar index, which tracks the greenback against a basket of six major currencies, remains close to its lowest since August. 

November is now on course for the dollar’s worst performance in a year, indicating a shift in sentiment with expectations that the Federal Reserve’s rate hike cycle is near its end. 

The German economy released inflation data on Wednesday at 9pm HKT. Traders expected a reading of 3.5%, down from 3.8% last month. A second reading of US GDP will come 30 minutes later. The economy posted a robust first reading. 

Thursday will then see a barrage of French, Italian, and European inflation data from 3:45-6pm HKT. We will deliver the latest US PCE inflation numbers a few hours later.  

These figures could create a big move in the EURUSD and stocks if they highlight a diverging trend between Europe and the US. Traders are focused on a US pause and rate cuts next year. Any change to that outlook could see a bounce in the dollar. 

Federal Reserve officials have also eased their hawkishness on interest rates. Fed Governor Christopher Waller said:  

“I am increasingly confident that policy is well positioned to slow the economy and bring inflation back to 2%.” 

“If we see disinflation continuing for several more months – I don’t know how long that might be, three months, four months, five months … you could then start lowering the policy rate just because inflation’s lower,” he added. 

However, another Fed governor, Michelle Bowman, said, “My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2% target in a timely way”. 

Analysts now predict that the Federal Reserve will cut interest rates in 2024. Whether other central banks will follow to help their economies remains to be seen.

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