The Euro to Dollar pair has been trading negatively around the level of 1.0561, near the key support level at 1.0550 during the past few hours of Wednesday’s trading session.
Even after the release of the final reading for the Eurozone Consumer Price Index for September, which was in line with expectations, the next major support level for the pair could be at 1.0508, with 1.0500 being the following significant support.
I believe the European Central Bank is still aware of rising inflation rates and their negative effects on the Eurozone’s economy. Expectations of interest rates remaining unchanged are high, which could reduce the annual core inflation rate from 5.3% to 4.5% in September, according to today’s preliminary figures.
Regarding the European Central Bank’s comments on inflation and future monetary policy, they are not clear, coinciding with market anticipation for ECB President Christine Lagarde’s speech later today. References to inflation figures and future monetary policy statements by the key driver for Euro to Dollar trading in the short term.
Away from the economic calendar, I think investors should keep an eye on geopolitical news updates from the Middle East throughout the day. Joe Biden’s visit will be a pivotal turning point for events, and consequently, the movement of the dollar index.
Today, the focus will also be on the U.S. housing sector, as a decline in housing sector numbers could raise concerns about the overall economic environment in the United States. The housing sector represents a real test for the U.S. economy, and a downturn in housing market conditions could affect consumer confidence and consumption, thus negatively impacting the economy.
While the housing sector in the United States contributes to less than 20% of the U.S. economy, private consumption in the United States contributes to more than 65% of the U.S. economy. A recession in the housing market could indirectly affect the U.S. economy, impacting the movement of the dollar index negatively.
The speeches of members of the Federal Open Market Committee will be crucial; it is scheduled for John Williams, Christopher Waller, Michelle Bowman, and Patrick Harker to speak. I expect this to influence market reactions and pricing for U.S. retail sales figures and opinions on interest rate hikes, potentially boosting the appetite for the U.S. dollar.
In my opinion, the conflict in the Middle East and Joe Biden’s visit needs close monitoring, as crude oil prices will reflect market sentiments about Biden’s visit and any escalation threats involving other Middle Eastern countries, indirectly affecting global financial markets.
In the end, despite the recent gains, the Euro to Dollar pair remains vulnerable to a reversal. The overall economic environment in the United States remains strong, supporting expectations of a more hawkish Federal Reserve policy.
News updates from the Middle East will also influence short-term market trends. Speeches by members of the Federal Open Market Committee and remarks by Federal Reserve Chairman Powell could have a significant impact on price movements.