Possibility of euro recovery after the downturn | 01 October 2024

Events to watch out for today:

12:00 GMT+3. EUR - Consumer Price Index

17:00 GMT+3. USD - ISM Manufacturing Index

EURUSD:

EUR/USD followed familiar territory at the start of new trading, holding above 1.1130 but failing to find new territory at the top of the market. Fresh EU inflation data is due to be released at the start of the European trading session on Tuesday, after European Central Bank (ECB) President Christine Lagarde warned that EU inflation is likely to dip below core levels before heading back up at the end of the year.

Preliminary Harmonised Index of Consumer Prices (HICP) data on inflation on the European continent will be released on Tuesday. The core HICP is expected to fall to 1.9 per cent year-on-year from the previous reading of 2.2 per cent. Despite the decline in overall inflation, ECB President Lagarde noted that a rise in October inflation figures cannot be ruled out as central bankers struggle with inflated expectations of rate cuts from market participants. As for the US, markets will be closely watching ahead of Friday's US non-farm payrolls (NFP) report for September.

Several Federal Reserve officials made statements on Monday. Atlanta Fed President Rafael Bostic emphasised the importance of the employment market and hinted at the possibility of further rate cuts depending on economic data. Bostic clarified that if the Non-Farm Payrolls (NFP) report shows less than 100,000 new jobs, it could prompt the Fed to take more aggressive action.

Following Bostic, Fed Chairman Jerome Powell said that investors should not expect additional large rate cuts unless there is a significant downturn in US economic data. This statement caused the US dollar to strengthen and caused traders to revise their expectations of a 50 basis point rate cut in November. Powell indicated to investors that after a significant rate cut in September, the Fed is likely to make two more 25 basis point rate cuts in the near term, which weakened market expectations for a further 50 basis point rate cut in November.

Trading recommendation: We follow the level of 1.1180, if the level is fixed above, we consider Buy positions, if the level rebounds, we consider Sell positions.

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