The EUR\/USD pair pulled back as the US Dollar steadied following recent US economic data releases. Data showed the US Personal Consumption Expenditures (PCE) index for September met expectations, maintaining a stable inflation outlook.<\/p>\n
The Euro trimmed earlier gains, trading around 1.1635, after reaching a daily high of 1.1628. Despite this, the pair is set for a second consecutive weekly gain, with growing market expectations for a Federal Reserve rate cut.<\/p>\n
September’s PCE report revealed a 0.2% monthly rise in Core PCE, aligning with predictions, while the annual rate slightly decreased to 2.8%. Headline PCE remained consistent at 0.3% for the month, matching forecasts.<\/p>\n
Personal Income surpassed forecasts, rising 0.4%, while Personal Spending increased by 0.3%. The University of Michigan survey showed improved consumer sentiment, with the Consumer Sentiment Index rising to 53.3.<\/p>\n
Labour data presented mixed results, with a drop in ADP Employment Change, lower Challenger Job Cuts, and reduced Initial Jobless Claims. These elements support a potential dovish Federal Reserve approach, with markets predicting an 87% chance of a 25 basis point rate cut at the upcoming policy meeting.<\/p>\n
The US Dollar strengthened, particularly against the Japanese Yen.<\/p>\n
With the US Dollar weakening, we are seeing the EUR\/USD move towards its recent highs around 1.1635. The latest job numbers from this morning, November’s Non-Farm Payrolls, came in much weaker than expected at only 95,000. This reinforces the market’s belief that the Federal Reserve is ready to change its policy.<\/p>\n
This weak hiring signal comes right after we saw the latest Personal Consumption Expenditures (PCE) report for October show core inflation easing to 2.8%. Looking back, this reminds us of the pattern from late 2023 when slowing inflation and job growth preceded a major policy shift. These two data points together are building a strong case for a more dovish Fed.<\/p>\n
As a result, we’ve seen market expectations for a rate cut at the December 16-17 meeting skyrocket. The CME FedWatch Tool now shows a 91% probability of a 25 basis point cut, up from just 70% a week ago. This shift in sentiment is the primary driver behind current currency movements.<\/p>\n
For derivative traders, this points towards positioning for continued dollar weakness against currencies like the Euro in the coming weeks. We should be looking at buying call options on the EUR\/USD, as this allows for profiting from upward movement while capping potential losses. Implied volatility is expected to increase significantly as we get closer to the Fed’s announcement on December 17th.<\/p>\n
The main risk to this view is a surprisingly strong data point or hawkish comments from a Fed official before the meeting. Therefore, we should also consider strategies that protect against a sharp dollar rally if the Fed doesn’t cut rates. This could involve buying cheap, out-of-the-money put options on the EUR\/USD as a hedge.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD retreats as US data supports steady inflation; markets price in Fed rate cut likelihood.<\/p>\n","protected":false},"author":62,"featured_media":16960,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36166","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36166","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=36166"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36166\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16960"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=36166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=36166"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=36166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}