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EUR/USD Extends Losses Near 1.1040; Fed And ECB Meetings Anticipated
The EUR/USD pair extends its decline near 1.1040 on Wednesday. As the EU economy has weakened and recession fears have increased, the Euro continues to be under pressure. Investors are simultaneously preparing for the Federal Reserve (Fed) and European Central Bank (ECB) interest rate decisions.
In the early Asian session, the EUR/USD pair extends its decline and edges lower to the 1.1040 level. Concerns about an economic downturn in the Eurozone prompted the major pair to trade in the red for the sixth consecutive day on Wednesday.
The Euro remains under duress following the release of disappointing economic data. The IFO Institute's monthly survey revealed on Tuesday that the German Business Climate Index decreased from 88.6 to 87.2 in July. This result fell shy of the 88.0 forecast by market analysts. The director of IFO surveys, Klaus Wohlrabe, told Reuters that the German Gross Domestic Product (GDP) is likely to contract in the third quarter, putting pressure on the Euro.
The Eurozone manufacturing sector's woes exacerbated in July, as the Manufacturing PMI dropped to 42.7, below market expectations of 43.5 and June's reading of 43.5, as reported earlier this week. The index dropped to its lowest point in 38 months.
On Thursday, the ECB is expected to increase rates by 25 basis points (bps). In spite of this, the likelihood of a September rate raise has diminished as the EU economy has slowed and recession fears have increased.
The Conference Board's Consumer Confidence Index increased to 117 in July from 110.1 (revised from 109) in June across the Atlantic. In the same vein, the May Year-Over-Year House Price Index came in at 2.8%, exceeding expectations of 2.6% but falling short of the previous month's data. In July, the Richmond Fed Manufacturing Index fell from -8 in June to -9.
On Wednesday, the Federal Reserve (Fed) will announce its monetary policy decision. It is widely expected that the Fed will increase interest rates by 25 basis points (bps) to 5.25–5.50%. Market participants will closely monitor the press conference of Federal Reserve Chairman Jerome Powell for clues about the future course of monetary policy. This significant occasion could spark volatility in the financial markets.
Market participants are simultaneously preparing for the publication of monetary policy decisions by the US Federal Reserve (Fed) and the European Central Bank (ECB) on Wednesday and Thursday, respectively. Also attentively observed will be the FOMC Press Conference and the ECB Press Conference. In addition, the US Advanced Gross Domestic Product (GDP) QoQ and the Personal Consumption Expenditure (PCE) Price Index MoM will be released later this week.
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