- EUR/USD made a weekly low at 0.9955, just below the 20-day EMA.
- US economic data fueled expectations of a 100 basis point rate hike, with a 26% chance.
- Money market futures are pricing in a 75 basis point ECB rate hike in October.
The EUR/USD recovers slightly from yesterday’s losses, advancing almost 0.31%, due to the softness of the US dollar after the August producer price index (PPI) in the US fell 0.1%, in line with the consensus, albeit easing fears that inflation will take hold.
On Wednesday, EUR/USD started trading near daily lows at 0.9955, but rallied towards daily highs above 1.0020 before breaking back out of parity. At time of writing, EUR/USD is trading at 0.9985, up 0.19%.
Before Wall Street opened, the US Department of Labor reported that producer prices paid in August contracted by an estimated 0.1%, signaling that supply chain headwinds supply are decreasing. Meanwhile, the core reading rose 0.4%. Meanwhile, annual Producer Price Index (PPI) figures slowed from 9.8% of the previous reading to 8.7%, while Core PPI beat estimates of 7%, peaking at 7.3%.
The US economic data published during the month of September have reinforced the Fed’s arguments in favor of a rate hike of 75 basis points. However, the possibility of a 100 basis point rise arose after the CPI reported on Tuesday that core inflation was stronger than estimated. According to the CME FedWatch tool, the odds of a 100 basis point rate hike stand at 26%.
In the euro zone, industrial production for July fell by 2.3% month-on-month, against an estimated 1.1% contraction, which shows the deterioration of the bloc’s economy. As a result, the annual reading fell 2.4%, against expectations of 0%. Germany’s weakness spread to other large Eurozone economies. Meanwhile, STIRs have priced in an 80% chance of a 75 basis point ECB rate hike in October, amid a 250 basis point tightening over the next 12 months.
What must be considered
Jobless claims, New York Fed and Philadelphia Fed business indices, along with important retail sales figures will be released on the US economic calendar.
EUR/USD Key Technical Levels
Source: Fx Street
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