- EUR/USD has regained the value it previously lost and is currently maintaining its position above 1.0750.
- It was expected by economists that the European Central Bank (ECB) would keep the interest rates unchanged on Thursday.
- US Consumer Price Index (CPI) increased by 0.6% MoM in August, which marks the highest monthly gain in 14 months, compared to a 0.2% rise in July.
- Investors are eagerly anticipating the European Central Bank’s rate decision, as well as a speech by ECB President Christine Lagarde. In addition, they are keeping a close eye on the release of economic data from the United States.
Here's the EURO down 9 weeks in a row… $EURUSD $FXE This would be the first time this has happened since 2014… pic.twitter.com/nW8L1F75XL
— Robert Lesnicki (@Robertlesnicki) September 14, 2023
Amid the early European session on Thursday, the EUR/USD pair is gathering strength and hovering around 1.0750. Despite the positive US inflation data, traders seem to be waiting for the European Central Bank (ECB) interest rate decision on the same day. The expectation in the market is that the ECB will maintain the interest rate at the September meeting.
European Central Bank raises key interest rates amid continuing inflation concerns https://t.co/AnvEnOPPoU
— #TuckFrump (@realTuckFrumper) September 14, 2023
EUR/USD: ECB may increase interest rates as markets predict 65% chance, investors watch for Lagarde’s speech for cues
A Reuters poll conducted between September 5 and 7 revealed that most economists expected the ECB to maintain interest rates on Thursday. However, with the changing sentiment, money markets have now priced in a 65% chance of an increase. This is expected to be the final increase in a cycle that began in July 2022. Investors will be watching for cues from the ECB Present Lagarde’s speech later in the day. If ECB policymakers make hawkish comments, the Euro may gain strength against the US Dollar (USD). This could act as a tailwind for the EUR/USD pair.
In terms of the US dollar, recent data revealed that the headline inflation rose to its highest level in 14 months for August. The Consumer Price Index (CPI) in the United States increased by 0.6% MoM, up from 0.2% in the previous reading. The annual figure showed an improvement from 3.2% to 3.7%, which was better than expected. Excluding volatile food and energy prices, the core CPI went up by 0.3% MoM, compared to 0.2% in the previous month. The annual core CPI was reported at 4.3%, compared to 4.7% in the prior reading.
Between 2000 and 2023, the US #dollar share of foreign currency reserves fell from 72% to 59%. #dedollarization
Meanwhile, the RMB has seen a recent surge in its share of foreign currency reserves. pic.twitter.com/GD0BIiWEt6
— GLDB ETF Fan | Stocks & Gold (@GLDB_ETF) September 14, 2023
The upcoming FOMC meeting has led markets to believe that the Federal Reserve (Fed) will refrain from changing interest rates. However, recent figures suggest that the Fed should remain vigilant for any signs of a resurgence in inflation over the next few months. According to the CME Fedwatch Tool, investors have estimated a 97% probability that interest rates will remain unchanged at 5.25%-5.50% in September. Nevertheless, the probability of a rate hike at the November meeting has increased to 49.2%.
New BRICS World Currency And Trade Alliance Might Be Dead Before Getting Started Amid Disagreement And US Dollar Still Used In 90% Of All Trade https://t.co/zMUpQaumtW
— manual salazar (@hallelujesus202) September 14, 2023
Traders will have their eyes glued to the ECB interest rate announcement scheduled for 12:15 GMT, as well as the press conference held by ECB President Lagarde at 12:45 GMT. On Thursday, the US weekly Initial Jobless Claims, Producer Price Index (PPI), and monthly Retail Sales reports will be released, all of which are significant events that could lead to market volatility. As a result, traders can expect to find trading opportunities centered around the EUR/USD pair.