EUR/USD bulls engage ahead of Federal Reserve and European Central Bank


  • EUR/USD bulls rally on Federal Reserve and European Central Bank prospects.
  • United States economic data weighed on the US Dollar with more to come before the Federal Reserve,
  • EUR/USD bulls are firming from near 1.0480 support and are taking on resistance around 1.0570. 

EUR/USD is firmly higher on Thursday due to diminishing expectations for the Federal Reserve (Fed) to keep raising interest rates at the same aggressive pace. A rise in weekly jobless claims suggests that the labour market is slowing down. EUR/USD is currently 0.38% higher having rallied from a low of 1.0489 to a high of 1.0564 on the day so far. 

Federal Reserve expectations 

Weekly jobless claims rose to 230K, as expected. Continuing claims rose to 1.671M, topping the forecast of 1.6M and the data comes ahead of next week's Federal Reserve meeting. Money markets show there is a 91% chance that the policy-setting Federal Open Market Committee (FOMC) will raise rates by half a point next week, and just a 9% chance there will be another 75 basis point increase.

There will be more key data events coming up before the Federal Reserve December 14 meeting. The Producer Price Index and the University of Michigan's consumer sentiment survey on Friday as well as November's Consumer Price Index are due. Investors will be on the watch for any signs that the Federal Reserve is getting ready to pause its hikes.

Noting the shift in market sentiment following last Friday's Nonfarm Payrolls (NFP) and this week's ISM Services data, analysts at Danske Bank said ''we acknowledge that our earlier call of a 75bp hike next week appears unlikely, but do not think the need to tighten monetary policy further has disappeared. We adjust our Federal Reserve call, and now expect a 50 basis points (bp) hike next week, followed by 50bp in February and 25bp in March. Thus, we maintain our call for a terminal rate of 5.00-5.25% unchanged.''

European Central Bank in focus

The European Central Bank (ECB) and the Bank of England (BoE) are also set to announce interest rate decisions next week and are expected to act in order to thwart stubbornly high inflation.

''At next week's meeting, we expect the European Central Bank to deliver a 50bp rate hike with a hawkish twist,'' analysts at Danske Bank said. ''Specifically, we expect the European Central Bank to present key principles of the end to reinvestments under the Asset Purchase Programme (APP) process (in which reinvestments will almost come to a full stop) and an open-ended wording for more rate hikes to come. This will be a compromise, which we believe will be palatable to both hawks and doves.''

''We currently expect European Central Bank rate hikes into Q1 next year, with the deposit rate peaking at 2.75%, but with risks skewed for more hikes,'' the analysts added. 

EUR/USD technical analysis

While on the front side of the daily trendline, EUR/USD bulls are firming from near 1.0480 support and are taking on resistance around 1.0570. A break there opens the risk of a move in EUR/USD beyond 1.0600:

A move in EUR/USD below the trendline, however, will expose supports near 1.0490 and 1.0440 and open prospects of a deeper correction towards 1.0400. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
UK CPI set to grow at stable 2.2% in August ahead of BoE meeting

UK CPI set to grow at stable 2.2% in August ahead of BoE meeting

The United Kingdom Office for National Statistics will release August Consumer Price Index figures on Wednesday. Inflation, as measured by the CPI, is one of the main factors on which the Bank of England bases its monetary policy decision, meaning the data is considered a major mover of the Pound Sterling.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Forex MAJORS

Cryptocurrencies

Signatures