EUR/USD Outlook
Euro post-Jackson Hole
After the Jackson Hole event, the euro displayed a rebound against the dollar, reaching $1.08. This rise signaled a recovery attempt following recent two-month lows.
Data-focused week ahead for Euro
The week ahead is marked by a series of significant economic data releases. On Thursday, the Personal Consumption Expenditure (PCE) data, a key inflation gauge for the Federal Reserve, will be disclosed. Additionally, non-farm payroll data is set for release on Friday. The tone for this data-heavy period could be set by the job openings figures for July, due on Tuesday. While the CME FedWatch tool indicates a 78% likelihood of the Fed keeping interest rates steady next month, the probability of a rate hike during the November meeting has risen to around 60%.
ECB hawkish sentiments
As the FX markets commence the week, the influence of European Central Bank (ECB) hawks is growing more pronounced. Their goal is to reignite rate expectations. Nevertheless, market sentiment seems to lean towards data-driven decisions over hawkish rhetoric. EUR/USD faces two crucial risk events: eurozone inflation figures ahead of the US payrolls report. The potential for robust core inflation to trigger another ECB rate hike could propel the pair upwards.
Eurozone’s approach to inflation
With the September ECB policy meeting approaching, the more hawkish voices within the bank are intensifying their communication efforts. The market’s probability for the September meeting remains below 50%, which might raise concerns among the hawkish members of the Governing Council. The market’s alignment with the ECB’s data-dependent stance is clear. Eurozone inflation data this week will play a pivotal role in shaping the prospects of a September rate hike.
Here are some additional factors that could impact the EUR/USD exchange rate in the near future:
- The outcome of the US-China trade war
- Russia-Ukraine confrontation
- The political situation in Europe
- The strength of the global economy
It is important to remember that exchange rates are volatile and are affected by a variety of factors. Investors should carefully consider all of the relevant factors before making any trading decisions.
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