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EUR/USD: No Interest Rate Hikes from the Fed and ECB in the Near Future?
Since the last days of September, the U.S. Dollar Index (DXY) has been trading in a sideways channel. Last week’s macroeconomic data did not provide a clear advantage to either the U.S. or the European currency. On October 17, U.S. retail sales data showed a monthly increase of 0.7%, slightly lower than the previous month but exceeding market expectations. The Eurozone’s ZEW Economic Sentiment Index also outperformed expectations with a positive reading, indicating a rebound from the previous negative figure. Revised data on consumer inflation in the Eurozone showed a decrease compared to the previous month. In the U.S., the number of initial jobless claims fell below expectations. Despite strong employment and GDP growth rates in the U.S., it seems unlikely that a rate hike will occur at the upcoming FOMC meeting on November 1. Federal Reserve officials have expressed concerns about economic pressure and high inflation. Analysts have different opinions on the future of EUR/USD, with 50% expecting a stronger dollar, 35% foreseeing an upward trend, and 15% adopting a neutral stance. Technical indicators on the D1 chart show a mixed outlook. The immediate support levels for the pair are around 1.0550, while resistance levels are at 1.0600-1.0620.
The upcoming week will bring important economic data releases and events, including Purchasing Managers’ Index data, U.S. housing market data, remarks from Federal Reserve Chair Jerome Powell, and the ECB’s meeting on the euro interest rate decision.
GBP/USD: Will the BoE Rate Remain Unchanged as Well?
GBP/USD has experienced an upward trend at the beginning of this month but faced resistance and a downward trendline. The British currency has lost approximately 7.5% against the dollar since mid-July due to the prevailing economic and geopolitical landscape. Rising tensions in the Middle East have led investors to seek the safety of the dollar. The rising cost of energy commodities is also affecting the UK, which puts pressure on its economy and currency. While experts predicted a recession for the UK at the beginning of the year, the situation has not materialized yet, but the economy is teetering on the edge. High energy prices during winter could fuel inflation and negatively impact the country’s economy. The Bank of England (BoE) might choose to focus on supporting the economy over combating inflation. Although some representatives of the central bank have mentioned the possibility of raising interest rates, BoE Governor Andrew Bailey’s recent interview appeared dovish. He expects a decrease in inflation in the coming months.
