EUR/USD gains ground on expectations of Fed rate cut
EUR/USD breaks its three-day losing streak, trading around 1.1050 during the Asian session on Monday. The upside of the EUR/USD pair could be attributed to the tepid US Dollar (USD) following the dovish sentiment surrounding the US Federal Reserve (Fed).
On Friday, the US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading of 2.5% but falling short of the estimated 2.6%. Meanwhile, the core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure of 2.6% but slightly below the consensus forecast of 2.7%.
ECB member hints at possible rate cut in September
European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau stated on Friday, according to Bloomberg, that there are « good reasons » for the central bank to consider cutting its key interest rates in September. Galhau suggested that action should be taken at the upcoming meeting on September 12, noting that it would be both fair and prudent to decide on a new rate cut.
Understanding the Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Source : www.fxstreet.com