Euro breaks above 1.10
The Euro broke above the 1.1000 major psychological yesterday and has remained there throughout today’s Asian trading session, fuelled by a broad-market US Dollar selloff that is sending the Euro higher as investor risk appetite climbs heading into the mid-week.
In recent days, expectations for US interest rates have shifted towards a more dovish stance, as there are bets that the FOMC has concluded its tightening of borrowing costs and will adopt a more accommodative stance next year. This sentiment gained momentum when Federal Reserve Governor Christopher Waller, typically a hawkish voice, expressed confidence that monetary policy is appropriately positioned. He suggested that if inflation continues to slow, rate cuts could be considered.
Also boosting the Euro was a disappointing round of data out of the US which has added to the case that the US Federal Reserve may be at the end of their rate hiking cycle as higher interest rates start to take their toll on the American economy.
New Home Sales declined by 5.6% month-over-month in October as new borrowers struggled to obtain mortgages, while Dallas Fed Manufacturing Index, which is a key indicator of business confidence decreased from 19.2 in October to 19.9 in November.
Comments by Fed Governor Christopher Waller might have weighed on the Greenback when suggested that the Federal Reserve may not insist on maintaining high interest rates if inflation consistently declines.
Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of preliminary Consumer Price Index data for November from Spain and Germany. Also, the European Commission is set to release its Economic Sentiment Indicator, which measures the overall trend of the overall Euro Zone economy.
From the US, market participants will focus on preliminary Gross Domestic Product numbers Annualized for the third quarter. Later in the day, the Federal Reserve will release the Beige Book, which will give a picture of the overall US economic growth.