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EUR/USD Maintains Its Defensive Stance And Maintains Its Position Above The Mid-1.0500s While Traders Await The US PCE Price Index
On Friday, EUR/USD trades with a slight negative inclination for the fourth consecutive day. An increase in US bond yields provides the USD with a tailwind and applies pressure. The Euro is undermined by the dovish ECB outlook, which also contributes to the offered tone.
The EUR/USD pair trends lower during the Asian session on Friday, unable to capitalise on the previous day's rebound from the 1.0520 area, which was also above a one-week low. Although spot prices maintain a modest downward bias for the fourth consecutive day, they remain just above the mid-1.0500s.
A slight increase in yields on US Treasury bonds provides a tailwind for the US Dollar (USD), which, in conjunction with the dovish outlook from the European Central Bank (ECB), becomes a significant headwind for the EUR/USD pair. In light of the robustness of the US economy, the Federal Reserve (Fed) is anticipated to maintain its hawkish position and extend interest rate hikes, notwithstanding indications of a reduction in inflationary pressures within the country.
The forecasts were validated by Thursday's publication of US macroeconomic data indicating that the economy grew at an annualised rate of 4.9% in the third quarter, as opposed to the 4.2% growth that was anticipated. In addition, orders for durable goods in the United States increased by 4.7% in September, exceeding market expectations. This, coupled with the dovish outlook of the European Central Bank (ECB), continues to drag on the EUR/USD pair.
The ECB, in accordance with expectations, maintained interest rates, putting an end to its unprecedented ten-year streak of increasing borrowing costs in response to mounting concerns over eurozone expansion. As the impact of higher interest rates grew, ECB President Christine Lagarde stated at the post-meeting press conference that growth would likely remain sluggish for the remainder of the year. However, she did not rule out the possibility of another rate hike.
In the interim, traders appear hesitant to engage in aggressive bearish wagers on the EUR/USD pair prior to the release of the Fed's preferred inflation indicator, the US Core PCE Price Index. The data will impact market anticipations regarding the trajectory of future rate hikes by the Federal Reserve. Consequently, this will stimulate demand for the USD and offer a renewed impetus to the major. However, market prices continue to be projected to experience moderate weekly declines.
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