HSBC analysts expect the ECB to cut rates by 25bps at each meeting | 26 September 2024

Event to watch out for today:

15:30 GMT+3. USD - GDP volume change for the quarter

EURUSD:

The Euro-dollar pair is trading firmly near 1.1140 during Asian trading on Thursday, supported by the general weakening of the US dollar. Several US Federal Reserve (Fed) officials are scheduled to speak on Thursday, including Fed Chairman Jerome Powell. In addition, weekly data on initial jobless claims, durable goods orders and final annualized US gross domestic product (GDP) data for the second quarter (Q2) will be released.

Traders are awaiting new catalysts as to how aggressive future US rate cuts will be. Many analysts believe the Fed will again raise the issue of a sharp rate cut at its November meeting. “Given his comments in Jackson Hole and what we heard from him at the press conference, yes, I think Chairman Powell will lean toward another 50 basis point rate cut if the labor market continues to weaken,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

Earlier this week, Chicago Fed chief Austan Goolsbee said policymakers “can't fall behind schedule” if they want the economy to make a soft landing. At the same time, Atlanta FRB President Raphael Bostic said the U.S. central bank doesn't need to be in a “mad rush” to cut rates. Fed chief Adriana Kugler said Wednesday she “strongly supports” the central bank's decision last week, adding that it would be appropriate to cut rates further if inflation continues to fall as expected. Traders will be more focused on the Fed's remarks on Thursday. Any dovish remarks from Fed officials this week could trigger bets on another large-scale Fed interest rate cut, which would send the Dollar lower against the Euro (EUR).

Survey data published earlier this week showed that business activity in the Eurozone as a whole contracted sharply, prompting speculation that the European Central Bank (ECB) will cut rates again. Analysts at HSBC said on Wednesday that they now expect the ECB to cut interest rates by 25 basis points (bps) at each meeting from October to April next year, given the weakening economic data.

Trading recommendation: Trade predominantly with Buy orders from the current price level.

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