30 August 2024, EUR/USD
EURUSD:
The EUR/USD is regaining lost ground around 1.1080, marking the end of a two-day losing streak in Friday's early Asian session. In light of the imminent release of German retail sales data for July and the US personal consumption expenditure (PCE) price index for July, traders may be inclined to adopt a wait-and-see approach.
The US Commerce Department has announced that the gross domestic product (GDP) grew at an annualised rate of 3.0% in the second quarter (Q2). This is according to the department's second estimate, released on Thursday. The figure surpassed the projected 2.8% and the preliminary estimate of 2.8%.
The weakening of inflation in Germany and Spain lends support to the view that the ECB should cut its rate in September. The report indicated that the US may avoid recession and reduced expectations of a larger 50 basis points (bps) rate cut by the Federal Reserve (Fed) in September. This provides some support for the US dollar (USD). The CME FedWatch Tool indicates that financial markets now anticipate a 25-basis-point rate cut in September with a 66% probability, while the likelihood of a more substantial reduction is 34%, down from 36.5% prior to the release of US GDP data.
In Germany and Spain, the consumer price index (CPI) data indicated a further decline in inflation in August, which is expected to prompt the European Central Bank (ECB) to consider a reduction in interest rates and exert downward pressure on the euro (EUR) exchange rate. ING head of macroeconomics Carsten Brzeski stated that the results were "great news for the ECB," and noted that the slowing economy and cooling inflation created the "perfect macro backdrop" for a rate cut. However, he highlighted that services inflation is not yet a concern.
Trade recommendation: We trade in the channel 1.1050-1.1100 on the bounce from the levels.
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