USD Factors
The US is set to release its October CPI report on Wednesday, November 13. Key forecasts show an expected increase of 0.2% month-over-month, 0.3% for core CPI, and 2.4% year-over-year.
This CPI release will be the first post-election economic test for the market’s rate cut expectations following the “Trump Trade” effect.
In its recent November 7 meeting, the Federal Reserve cut interest rates by 25 basis points. While acknowledging solid economic growth and a gradually softening labor market, the Fed pulled back its earlier stance of confidence in inflation reaching the 2% target, hinting at a potential slowdown or pause in future policy easing.
Emphasizing balanced risks around employment and inflation, the Fed noted economic uncertainties and pledged vigilance toward potential risks on both sides of its mandate.
Should the CPI figures fall short of expectations, yields and the dollar could face a pullback after their recent gains. Conversely, a stronger-than-expected inflation reading could propel the USD further, placing additional downward pressure on stocks and gold.
Euro Faces Pressures
The Euro faces mounting pressure amid political turbulence in Germany, where Chancellor Olaf Scholz recently dismissed Finance Minister Christian Lindner.
This shake-up represents a significant shift within German politics, adding new uncertainty to an economy already facing substantial challenges. Concerns are growing over Germany’s ability to pursue necessary economic reforms amid the political instability.
Traders are closely monitoring ECB policy signals ahead of its December meeting. ECB policymaker Robert Holzmann has suggested that a rate cut may be on the table next month, though he emphasized that any decision will rely on upcoming economic data.
Currency markets are watching for signs of stability and direction in EUR/USD amidst recent volatility, as traders assess the likely trajectory of the ECB’s next moves.
Technical Analysis
Source: TradingView
EUR/USD remains within a narrow trading range, hovering close to its four-month low around 1.0700. The pair attempted to recapture ground above the pivot point but failed. The near-term trend for EURUSD looks potentially bearish as the 100 Exponential Moving Average near 1.092 declines.
Upcoming US CPI data could influence the pair’s direction. Strong CPI figures may reinforce current trends, while softer-than-expected data could potentially support a rebound for the Euro.
