As trading unfolded in the early Asian markets this Thursday, the EUR/USD currency pair showed signs of waning momentum around the 1.0500 mark. A strengthening US Dollar (USD), buoyed by a positive stream of US economic indicators and a spike in Treasury yields, seems to be the primary force dampening the Euro’s enthusiasm. Presently, the EUR/USD hovers close to 1.0512, marking a modest 0.09% uptick for the day.
In related movements, the US Dollar Index (DXY) – a prominent gauge reflecting the USD’s potency against a collection of international currencies – surged to an impressive 106.60, a pinnacle unseen since last November. Concurrently, the 10-year US Treasury yield exhibited bullish behaviour, peaking at a remarkable 4.618%, a rate unmatched since 2007.
The Euro faced its own challenges, predominantly from lacklustre economic data emerging from the Eurozone. For instance, recent insights into German Consumer Sentiment, as disclosed by GfK, indicated a drop to -26.5 in October from its previous figure of -25.6 in September. Adding to the Euro’s woes are the upcoming preliminary Consumer Price Index (CPI) revelations from Spain and Germany. The speculations hint at a potential rise in Spanish inflation contrasted by a probable dip in Germany. The import of these initial inflationary figures cannot be understated, given their influence on monetary policies and subsequent market reactions.
On the US front, a recent disclosure from the US Census Bureau brought good tidings. US Durable Goods Orders for August defied expectations by registering a 0.2% m/m growth, rebounding impressively from a prior decline of 5.6%. These positive indicators bolstered the USD, offering resistance to the EUR/USD dynamic.
Current market temperaments appear to be dominated by risk-aversion, stemming from a mix of prolonged rate concerns and looming threats of a US government cessation. As investors globally, including those in South Africa, seek clarity, all eyes will be on Federal Reserve (Fed) Chair Jerome Powell’s upcoming address. A possible tempered stance from officials could restrain the USD’s rally, offering a reprieve to the Euro.
Future prospects involve keen anticipation of key data releases. From the Eurozone, we can expect the preliminary Spanish and German inflation figures for September, followed closely by the Eurozone’s Consumer and Business Confidence indices on Thursday. The US, in tandem, will reveal its weekly Jobless Claims report, its third revision of the Gross Domestic Product (GDP) for Q2, and Pending Home Sales data. The week caps off with the US Core Personal Consumption Expenditure (PCE) Price Index on Friday, where projections suggest a possible drop from 4.2% to 3.9%. This slew of data is expected to shape the trajectory of the EUR/USD in the days to come.