EURUSD is moving in Symmetrical Triangle and market has fallen from the lower high area of the pattern
EUR/USD Trades Stronger Near 1.0860 in Early Asian Session
The EUR/USD pair is showing some strength around 1.0860 during the early Asian trading hours on Monday. This comes as traders gear up for the anticipated interest rate cut by the US Federal Reserve (Fed) in September, which is putting pressure on the US Dollar (USD), also known as the Greenback.
US Inflation and Fed’s Rate Cut Speculations
Fed’s Key Inflation Gauge and Market Expectations
Recently, inflation in the US, measured by the change in the Personal Consumption Expenditures (PCE) Price Index, showed a slight decline in June. This has fueled expectations of an interest rate cut by the Fed in the upcoming months. The PCE inflation rate eased from a 2.6% annual increase in May to 2.5% in June. On a monthly basis, the PCE figure inched up by just 0.1% in June after being stagnant in May. The core PCE price index, the Fed’s preferred inflation measure, also saw a minor rise of 2.6% year-over-year in June, compared to 2.5% in May.
However, despite the softer inflation figures for June, it’s unlikely that the Fed will initiate rate cuts at its August meeting. Analysts at Morgan Stanley noted that significant progress on controlling inflation is necessary for the Fed to consider rate cuts, and they expect these cuts to begin at the September Federal Open Market Committee (FOMC) meeting. Financial markets are already pricing in a high probability (nearly 90%) of a rate cut in September, followed by additional cuts in November and December, according to the CME FedWatch Tool.
European Central Bank (ECB) and Euro Outlook
Potential ECB Rate Cuts and Economic Indicators
On the European side, there is also speculation about potential rate cuts by the European Central Bank (ECB). The ECB kept interest rates unchanged in its recent meeting, but weaker economic indicators, such as the German IFO survey results, are hinting at the possibility of future rate cuts. Traders are keeping a close eye on upcoming data, especially the preliminary Gross Domestic Product (GDP) figures for the second quarter from Germany and the Eurozone. Stronger-than-expected GDP readings could provide some support to the Euro (EUR) against the USD.
EURUSD has broken Descending channel in upside
Market Reactions and Future Cues
Trading Sentiment and Economic Indicators
As the markets continue to digest the latest inflation data and central bank signals, the EUR/USD pair is experiencing mild gains. The anticipation of a Fed rate cut is a significant factor influencing the pair’s movement, as it generally weakens the USD. On the other hand, the prospect of ECB rate cuts could weigh on the Euro. Therefore, traders are carefully monitoring economic indicators from both the US and the Eurozone to gauge the likely actions of the Fed and the ECB.
Summary
The EUR/USD pair is trading with mild gains around 1.0860, driven by expectations of an interest rate cut by the US Federal Reserve in September. Recent US inflation data, showing a slight decline, supports the speculation of a Fed rate cut, which is pressuring the Greenback. Meanwhile, traders are also looking at the European Central Bank’s potential rate cuts, influenced by weaker economic indicators in the Eurozone. Upcoming GDP figures from Germany and the Eurozone will be crucial in determining the future direction of the EUR/USD pair. As always, staying updated with economic data and central bank announcements is key for traders navigating the forex market.
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