- On Friday, the EUR/USD crossed the 1.1300 mark, a level it hadn’t reached in more than a year.
- Fed policymakers signal potential interest rate reductions at Jackson Hole.
- Upcoming next week: important inflation data from the EU and US.
As the US Dollar continues to experience widespread declines, the EUR/USD pair experienced a surge that resulted in a gain of 0.7% during its second-strongest day in August. Federal Reserve (Fed) officials have provided investors with unambiguous indications that the United States central bank is prepared to start reducing interest rates and skyrocketing market sentiment.
Rate markets are indicating a high probability of a double cut on September 18, according to the FedWatch Tool provided by the CME. On the other hand, the remaining rate board is still concentrating on a single quarter-point cut. As a result of comments made by Federal Reserve Chairman Jerome Powell at the Jackson Hole Economic Symposium, there has been an increase in the anticipation of a reduction of fifty basis points in the interest rate that will be implemented in September. In a public statement, Powell acknowledged that it is now the right time for the Federal Reserve to begin reducing reference rates.
Inflation Metrics From the EU and US Are on the Horizon for Late Next Week
The upcoming week will begin with a schedule of economic data releases that is considered to be relatively calm. On the other hand, significant inflation figures are on the horizon for both the European Union and the United States, and it is anticipated that these figures will have a considerable impact. A significant event that will take place on Thursday is the upcoming growth figures for the United States Gross Domestic Product (GDP). In contrast, the forthcoming inflation double header that is scheduled to take place the following Friday will be the primary focus of interest for fiber traders.
The starting point of the data scheduled for the following Friday will be the forthcoming release of the preliminary data for the Harmonized Index of Consumer Prices (HICP) for August in the European Union. According to projections, these figures are anticipated to demonstrate a further decline in key inflation indicators for the European Union, bringing the European Central Bank (ECB) closer to its target of 2% annualized inflation. Inflation, as measured by the Personal Consumption Expenditure Price Index (PCE), is expected to remain stable in the United States, surpassing the target of 2% that the Federal Reserve has set for inflation. It is anticipated that the core PCE inflation rate for the year that will end in July will be approximately or very close to the 2.6% that was recorded during the previous period.
Forecasting the Price of EUR/USD
Despite a few bumps in the road, Fiber reached a brand new 13-month high on Friday, exploring chart territory above 1.1300. Although there was a strong bullish presence in the order flow, the intraday price action had difficulty maintaining this important price level. However, the trading week ended with a commendable gain of 1.51%, making it one of the pair’s most impressive performances in a single week since November of last year.
The bids for EUR/USD are continuing to rise. The pair received a boost from the recent swing low and is now approaching the 200-day Exponential Moving Average (EMA) at 1.0850. If a strong breakthrough of 1.1300 isn’t in sight, buyers might witness a resurgence of selling pressure, pushing prices back down in the short term.