The Euro-dollar pair is losing ground after two days of gains, trading near 1.08100 during Asian hours on Wednesday. The Euro is under downward pressure as the European Central Bank (ECB) is expected to cut the deposit rate again. Money markets currently rate the probability of a 50 basis point rate cut during the December meeting at nearly 50%.
Investors will be keeping a close eye on preliminary German and Eurozone gross domestic product (GDP) data, as well as preliminary German Harmonized Index of Consumer Prices (HICP) data scheduled for release on Wednesday. On Wednesday, the focus will shift to preliminary US Q3 Gross Domestic Product (GDP) data and October employment change data from ADP.
ECB policymakers have recently expressed different views on monetary policy. Pierre Wunsch, Governor of the National Bank of Belgium, said that the central bank has no pressing need to accelerate interest rate cuts and suggested that it might even settle for a more modest pace. In contrast, Mario Centeno, Governor of the Bank of Portugal, advocated considering a 50 basis point rate cut as a possible option for December.
The decline in EURUSD could also be attributed to a rise in the US Dollar amid rising Treasury yields. The US Dollar Index (DXY), which measures the value of the US dollar against six other major currencies, is trading around 104.30, while the yields on 2-year and 10-year US Treasuries are at 4.09% and 4.24%, respectively, at the time of writing.
The risk-sensitive EUR/USD may continue to decline amid continued uncertainty surrounding the US presidential election. A three-day Reuters/Ipsos poll, which ended on Sunday and was released on Tuesday, showed that the race is virtually tied as we get closer to the November 5 election.
Trading recommendation: Watch the level of 1.08000, if consolidated below consider Sell positions, if rebounded consider Buy positions.
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