- Investors expect the European Central Bank to cut borrowing costs by 25 basis points.
- The dollar remained steady after the US consumer inflation report.
- The CPI report suggested a slow easing of monetary policy.
The EUR/USD outlook suggests more downside for the euro as markets expect another ECB rate cut later today. Meanwhile, the dollar recovered after upbeat monthly inflation numbers in the previous session.
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Investors expect the European Central Bank to cut borrowing costs by 25 basis points later today. However, the focus will be on messages for future political moves. At this point, markets fully expect another rate cut in December. Meanwhile, the probability of a decrease in October is 37%. So investors will be watching to see if policymakers are ready to cut again in October. Such an outcome would weigh on the euro.
The Eurozone economy has slowed significantly and inflation has cooled. Consequently, the ECB does little to prevent borrowing costs from falling.
Meanwhile, the dollar remained steady after the US consumer inflation report. Core inflation jumped an unexpected 0.3% in August, reducing the likelihood of a massive rate cut in September. Meanwhile, the annual figure eased to 2.5%, a step closer to the US central bank’s target. The CPI report was bullish on the dollar as it suggested a slow easing of monetary policy. With no major reports before next week’s meeting, there is a good chance the Fed will cut rates by 25 basis points.
However, things could change in the future. The labor market is declining, and demand in the economy has slowed down. Therefore, there is still a risk of high speed skating. Any signs of a quick decline could renew bets for a 50 basis point cut after September.
EUR/USD key events today
- ECB policy meeting
- US Wholesale Inflation Report
EUR/USD Technical Outlook: Bears eyeing 1.0950
From the technical side, EUR/USD the price is making new lows below the key support level of 1.1050. The bias is bearish as the price is trading below the SMA and the RSI is trading in bearish territory below 50.
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After breaking the previous low, the price is likely to extend to the 1.618 Fib level, which is close to the 1.0950 support level. The downtrend could pause here before returning to the SMA or breaking below. However, the price could continue to consolidate below 1.1050 until there is a strong catalyst.
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