Oct 17, 2024 (MENAFN via COMTEX) --
(MENAFN - Daily Forex)
The Euro currency pair is under pressure against the US dollar and the British pound, as revised inflation data in France for September shed light on the European Central Bank's decision tomorrow, Thursday. France reported consumer price inflation at -1.3% on a monthly basis in September, down from the initial estimate of -1.2%. The annual rate was cut to 1.4% from 1.5% in the initial release, leaving it comfortably below the ECB's target of 2.0%. As for forex trading, the Euro against the US Dollar EUR/USD price fell towards the 1.0881 support level, the currency pair's lowest in more than two months.
To put the developments in perspective, this is the largest monthly decline in the French CPI in more than 34 years.
Faced with such data, the ECB has limited ammunition to justify keeping its key interest rates at current levels, and two more rate cuts are now likely in 2024. Overall, the early realization that the ECB can now"outperform" the US Federal Reserve, and the Bank of England explains why the euro is under pressure. Key to the euro outlook will be the tone of the ECB's guidance on future policy decisions."Dovish guidance (growth versus inflation, door open for December?) poses a downside risk to the euro," says Kenneth Brooks, analyst at SocieÌteÌ GeÌneÌrale.
Consistently, the ECB has stressed that its policy stance will depend on the nature of the incoming data, which conveys a sense of restraint. However, the data is clear that the battle against inflation in France has been won, especially given last week's announcement that the new government will seek to save EUR60 billion next year, which would create a significant drop in French demand.
Meanwhile, the German economy has stagnated, which is why Bundesbank President Joachim Nagel said last week that he was open to considering another interest rate cut at the ECB meeting. He said that German economic growth in the second half would be weaker than expected. According to the economic calendar, the data released confirmed that the annual inflation rate in Spain fell by 0.6% month-on-month in September, and the annual rate reached 1.5%. As for the eurozone as a whole, annual inflation was reported at 1.8% in September 2024, down from 2.2% in August. The last straw for the ECB"hawks" - those who want to remain cautious when considering interest rate cuts - is that service inflation remains relatively high at 4%. There is an argument that service inflation needs to fall further before we can bring overall inflation below 2.0% sustainably. However, services inflation is often seen as a lagging indicator, and the overwhelming decline in headline inflation will eventually lead to a pullback in the coming months.
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EUR/USD also fell as interest rates in the US remain higher than those in Europe. Also, It fell on growing hopes that Donald Trump will win the US election in November. In an interview with Bloomberg on Tuesday, Trump reiterated his threat to impose more tariffs, opening the door to more global tensions.
On the daily chart, EUR/USD formed a double top pattern at 1.1200, and recently moved below the neckline at 1.100. also, It broke below key support at 1.0980, the highest level since March 2024. The pair moved below the 50-day and 100-day EMAs. Meanwhile, the MACD and RSI pointed to the downside.
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COMTEX_458888015/2604/2024-10-17T06:36:49
