The euro continued to fall on Thursday. In the European market, EUR/USD was trading at 1.1095 at the time of writing, down 0.22% from the previous day. The US Dollar has rebounded against the euro this week, rising 0.89%.
German and eurozone inflation expected to ease in August
Inflation is expected to ease in Germany and the Eurozone, which could have a major impact on the European Central Bank’s interest rate announcement on September 12. Inflation rates are expected to fall in German states, with the uniform national inflation rate expected to fall to 2.1% in August from 2.3% year-on-year in July.
The Eurozone will release its Consumer Price Index (CPI) on Friday. The market expects a CPI of 2.2%, down from 2.6% in July. Core inflation is expected to fall to 2.8% from 2.9% in July. The decline in inflation in Germany and the Eurozone will provide a case for further interest rate cuts next month. The case for a rate cut is strengthened by the weakness of the Eurozone economy and the Federal Reserve’s willingness to cut rates as well. At the same time, concerns about wage growth are a reason for the ECB to postpone rate cuts.
The Federal Reserve is set to cut interest rates next month, joining a global trend of central banks cutting rates now that the threat of inflation has largely subsided. Most FOMC members support a cut in September, but Atlanta Fed President Raphael Bostic said on Wednesday that the Fed should wait for more data before cutting rates because it would be a mistake to raise them again after cutting them.
EUR/USD Technical
EUR/USD is testing the support at 1.1087, below which there is support at 1.1055, with resistance at 1.1138 and 1.1170.
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Kenny Fisher is an experienced financial market analyst with a focus on fundamental and macroeconomic analysis, providing daily commentary covering a wide range of markets including FX, equities and commodities. His articles have appeared in leading online financial publications such as Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
