EUR/USD still in the red ahead of CPI report
Upcoming US and ECB interest rate decisions may influence future forex strategies. Traders must navigate potential rate cuts and inflation impacts on currency values.
Key points
- EUR/USD decreased from 1.1071 to 1.1042 but rebounded to 1.1050
- US Core Inflation Rate predicted to remain at 3.2% with CPI forecasted to increase to 315
- ECB interest rates forecasted to decrease from 4.25% to 4.0%
- US interest rates standing at 5.5% with potential cut to 5.0%
- Potential slowing of USD appreciation against EUR due to reduced rate gap
EUR/USD opens on downtrend with slight recovery on US time
There was a bit of a downtrend for the euro-dollar pair this morning when the London market opened, decreasing from 1.1071 to 1.1042 over the course of a couple hours; however, EUR/USD made a solid rebound upon the US market’s opening, recovering to 1.1050. From August 19th, 1.1040 has been the approximate low for the euro-dollar pair. This activity highlights the importance of market timing and the influence of different market openings across global financial hubs. Traders should note the resilience of the EUR/USD pair and consider the time of day when planning their strategies.
EUR/USD price history
US inflation rate and CPI announcement ahead
The US Core Inflation Rate and Consumer Price Index announcement is this Wednesday, leaving analysts with a hope of clearer interest rate cut predictions for September 18th. As of July 2024, the US Core Inflation Rate stood at a 3-year low of 3.2%, a slight decrease from June’s rate of 3.3%. Forecasts suggest a price increase of 3.2%, the same as last month. As for the Consumer Price Index, there was a previous increase in July to an all-time high of 314.54 points from June’s value of 314.18 points; forecasts suggest a CPI increase to 315 this Wednesday.
ECB meeting this Thursday with potential of wide interest rate differentials
As of July 2024, the European Central Bank decided to keep interest rates unchanged at 4.25%; this is consistent with June and May’s rate, which was a decrease from April’s rate of 4.5%. However, forecasts suggest a decrease of .25 to a rate of 4.0%, a level not seen since June of 2023. The elephant in the room regarding the ECB meeting on Thursday is what the wider interest rate differentials may do for the euro-dollar pair. With US interest rates standing at 5.5% (and the forecast of a sharp cut to 5.0%), this marks a still-wide gap of interest rates between countries.
What’s next for EUR/USD?
If interest rate announcements go as forecasted, a one percent gap is still considered relatively large; while this gap may still favor the US dollar against the euro, a reduced gap may lead to a slowing of the dollar’s appreciation. There is also the possibility of a reversion to a stable value for the pair, simply due to initial “shock” after the interest rate announcements. As for US inflation rate and CPI announcements, low inflation may boost the case of interest rate cuts by the Fed, potentially weakening the US dollar against the euro.
How to trade EUR/USD
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on EUR/USD
Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.