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The EURUSD pair edged higher on Wednesday after European Central Bank Executive Board member Piero Cipollone said that there was room to cut interest rates swiftly, despite elevated wage inflation.<\/p>\n
The pair reversed lower in previous sessions\u00a0on the back of diverging commentary from rate-setters at the US Federal Reserve and the ECB.<\/p>\n
Commentary from ECB officials point to a high likelihood it will cut interest rates in June, whilst a delay from the Fed is still possible. This is causing weakness for the Euro and depressing the EURUSD, since lower interest rates tend to reduce foreign capital inflows.<\/p>\n
On Tuesday, ECB Governing Council member Madis Muller said that \u201cwe\u2019re closer to a point where the ECB can start cutting rates,\u201d\u00a0adding that \u201cdata may confirm the inflation trend for the ECB\u2019s June meeting.\u201d<\/p>\n
Prior to his comments, ECB Governing Council member Fabio Panetta said that inflation was quickly falling to target and therefore there was a \u201cconsensus emerging\u201d for a rate cut, echoing views by Bank of Greece Governor Yannis Stournaras.<\/p>\n
ECB Chief Economist Philip Lane said a day earlier that wage inflation was \u201con track\u201d to coming back down to normal levels.<\/p>\n
Similar dovish comments came from Bank of France President Francois Villeroy de Galhau, who said April could even be in the frame for a first cut.<\/p>\n
Taken together with ECB President Christine Lagarde\u2019s comments at the last policy meeting, when she said the ECB would be reviewing policy on interest rates in June, the evidence is building to a compelling conclusion.<\/p>\n
By contrast, the Federal Reserve seems more split.<\/p>\n
Whilst Federal Reserve Chairman Jerome Powell seems to continue to advocate for a June rate cut, and the Fed\u2019s official forecast is for three 0.25% cuts to its fed funds rate in 2024, some individual members have diverged from the official script.<\/p>\n
On Tuesday, Atlanta Fed Governor Raphael Bostic said the Fed should take things slowly and that he now only expected one rate cut in 2024.<\/p>\n
His view echoed those of his fellow Fed board member Lisa Cook, who advocated for taking a \u201ccareful approach\u201d to easing over time to \u201censure inflation returns sustainably to 2.0%.\u201d<\/p>\n
She mentioned housing inflation, which remains high, though her view was that it would fall on lower rental demand.<\/p>\n
On Monday, Chicago Fed President Austan Goolsbee said the persistence of housing inflation continued to surprise him, but that he felt it would ebb away over time.<\/p>\n
\u201cThe main puzzle has been about housing,\u201d Goolsbee said, a major component in the consumer spending basket that has accounted for a large share of recent headline inflation readings, according to Reuters.<\/p>\n
In terms of US inflation, Friday\u2019s Core Personal Consumption Expenditures (PCE) Price Index data for February, considered the Fed\u2019s preferred gauge of inflation, is being held up as the next oracular event to determine when the Fed could cut interest rates.<\/p>\n
A higher-than-expected inflation reading in line with most recent gauges of inflation in the US could push back further the time when the Fed is expected to cut interest rates, with negative consequences for EURUSD.<\/p>\n
Economists at Scotiabank noted that the EURUSD pair holds a very narrow range in the low 1.0800s, with resistance is seen at 1.0865\/1.0875.<\/p>\n
\u201cBargain hunters are still likely to look at dips to near 1.0800 as a buying opportunity for now,\u201d they said.<\/p>\n
\u201cShort-term trend dynamics are neutral while the daily and weekly DMIs still lean, if only moderately, EUR-bullish. That should limit downside pressure on spot in the near term at least.\u201d<\/p>\n
Meanwhile, economists at ING expect limited impact of budget news from France, when on Tuesday it reported the 2023 deficit at 5.5% of GDP, substantially above the 4.8% seen in 2022 and higher than the government target of 4.9%.<\/p>\n
\u201cWe estimate that the deficit may well exceed 5% again in 2024,\u201d the ING economists said.<\/p>\n
\u201c Fiscal concerns should rise again as we head into the September budget in France, but we think the ECB will be well into its monetary easing process, making the general environment for eurozone bonds quite favourable.<\/p>\n
\u201cLooking at this week, we do not see major catalysts for a break higher or lower in EUR\/USD unless US core PCE surprises (consensus is clustered at 0.3% month-on-month). We think the pair can stabilise around 1.0850.\u201d<\/p>\n
(Source: OANDA)<\/p>\n","protected":false},"excerpt":{"rendered":"
The European Central Bank (ECB) is considering cutting interest rates in June, causing weakness for the Euro and depressing the EURUSD pair. ECB officials have expressed dovish views on rate cuts, while the Federal Reserve in the US seems more split on the issue. Bargain hunters may see dips in the EURUSD pair as a buying opportunity, and economists at ING expect the pair to stabilize around 1.0850.<\/p>\n","protected":false},"author":4,"featured_media":5785,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[1902,1766,598,2577,2369,260,50,534,203,599,1923,51,600,2624,1610,2515,3777,52,499,2110,696,415,747,67,899,1401,2981,185,54,34,1346,3331,55,3775,375,3480,1817,2682,1254,380,57,651,18],"class_list":["post-5784","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-other","tag-bank","tag-budget","tag-christine-lagarde","tag-concerns","tag-data","tag-dollar","tag-ecb","tag-ecb-rate-cut","tag-environment","tag-euro","tag-euro-dollar","tag-european-central-bank","tag-eurusd","tag-eurusd-pair","tag-evidence","tag-february","tag-fed-funds","tag-federal-reserve","tag-france","tag-funds","tag-gdp","tag-government","tag-greece","tag-inflation","tag-interest","tag-interest-rates","tag-jerome-powell","tag-main","tag-marketpulse","tag-markets","tag-meeting","tag-news","tag-oanda","tag-pressure","tag-rate-cut","tag-spending","tag-split","tag-surprises","tag-tradingview","tag-us","tag-us-fed","tag-us-inflation","tag-world"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"\n