- EUR/USD depreciates on hawkish sentiment surrounding the US Fed.
- Fed’s Waller hinted at a delay in interest rate cuts due to stronger inflation figures.
- ECB’s Villeroy suggested that the ECB's inflation goal of 2% is attainable.
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar (USD) influenced by the hawkish market sentiment surrounding the Federal Reserve (Fed) and expectations of prolonged higher interest rates. This shift in sentiment is supported by recent strong economic indicators from the United States (US). The EUR/USD pair edges lower to near 1.0780 during the Asian trading hours on Friday.
The US Dollar Index (DXY) strengthens, nearing 104.60, driven by hawkish statements from a Federal Reserve (Fed) official, which boosted the Greenback. Fed Governor Christopher Waller's comments on Wednesday hinted at a potential delay in interest rate cuts, given the strong inflation figures. Investors now await the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, to gain additional insight and guidance.
In the fourth quarter of 2023, the US Gross Domestic Product (GDP) Annualized expanded by 3.4%, surpassing market expectations of remaining unchanged at a 3.2% increase. The US Gross Domestic Product Price Index remained steady with a 1.7% increase, in line with expectations for Q4.
US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below both the expected and previous reading of 2.1%. Additionally, US Initial Jobless Claims decreased to 210,000 in the week ending March 22, contrary to expectations for an increase to 215,000 from the previous 212,000.
The Euro encounters difficulties following dovish remarks from European Central Bank (ECB) policymaker Francois Villeroy. Villeroy noted a rapid decline in core inflation, albeit it remains high. He suggested that the ECB's inflation goal of 2% is attainable, but warned of increasing downside risks if the ECB refrains from cutting rates.
Furthermore, ECB executive board member Fabio Panetta stated on Thursday that "the conditions to start easing monetary policy are materializing." He highlighted that restrictive policies are suppressing demand and leading to a swift drop in inflation. Panetta also indicated that risks to price stability have lessened.
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