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February 13th - Regan Capital analyst Skyler Weinand stated that weak US inflation data in January will not increase the likelihood of a Federal Reserve rate cut in the coming months, due to stronger-than-expected labor market data released earlier this week – 130,000 new jobs were added in January, and the unemployment rate was 4.3%. The Fed "simply cannot cut rates right now, given that the economy has just created six-figure jobs." Weinand expects the Senate to confirm Warsh as Fed Chair, succeeding Powell, but doubts his ability to build consensus on rate cuts. "We may not see any changes to the Feds policy rate this year." The CME FedWatch Tool shows that investors are currently pricing in at least two rate cuts this year.February 13th - Lower-than-expected inflation data released on Friday sent U.S. Treasury prices soaring, fueling investor expectations for three Federal Reserve rate cuts in 2026. The yield on the two-year U.S. Treasury note, most sensitive to central bank policy changes, fell as much as 6 basis points to 3.40%, a new low since October, before recovering slightly. Following the data release, traders priced in a rate cut of approximately 63 basis points this year—implying a roughly 50% probability of a third 25-basis-point cut before the end of the year, on top of the two already priced-in cuts, compared to 58 basis points priced in on Thursday. Earlier this week, traders had already stopped fully pricing in a 25-basis-point rate cut mid-year in response to the January non-farm payroll data, postponing their bets to July. Wall Street banks that had previously predicted a March rate cut have also pushed their expectations back to later in 2026.February 13 - Paul Ashworth, chief economist for North America at Capital Economics, said that it is important to emphasize that although the core PCE inflation measure is usually about 0.3 percentage points lower than the CPI on average, our calculations show that the core PCE inflation measure, which is preferred by the Federal Reserve, rebounded to 3.0% in January.February 13th - Seema Shah, Chief Global Strategist at Principal Asset Management, stated that the current situation is still insufficient to justify a near-term rate cut by the Federal Reserve. The continued strength of the labor market provides policymakers with a reason to maintain interest rates, and further slowing of inflation in the second half of the year, as the impact of tariffs fades, should reopen the door to further easing.Christopher Hodge, an analyst at Natixis: In the coming months, we expect inflation to continue to be higher than expected, but not to accelerate, which will allow the Federal Reserve to cut interest rates on weak labor market data.

The EUR/USD rise is getting close to 1.0200 as investors await US inflation data

Daniel Rogers

Aug 09, 2022 14:58

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The EUR/USD moves in the 1.0200 range during Tuesday's Asian session after falling from 1.0221 as traders look for fresh data. The major currency pair gained over the first part of the week but lost some of those gains by Monday's close. Recent price fluctuations, however, seem to be constrained by a lack of noteworthy data or events and a cautious attitude ahead of Wednesday's release of the US Consumer Price Index (CPI) for July.

 

Gains in the EUR/USD the day before are shown by higher readings of the Eurozone Sentix Investor Confidence Index and a drop in US Treasury yields. The primary sentiment indicator Index, however, increased in August from -26.4 to -25.2, which was projected to be the value. According to specifics, the eurozone's present state has improved from this month's lowest position since March 2021, when it was -16.5, to -16.3. The expectations index is at its lowest level since December 2008, despite a little increase to -33.8. It is still very close to that level. The US Dollar Index (DXY), in contrast, saw a daily decrease of 0.19 percent to 106.37.

 

The moderate Azione's resignation from the newly formed alliance ahead of the September elections looks to have put negative pressure on the Euro elsewhere due to Italian political worries.

 

The moderate Azione has backed out of its coalition with the Democratic Party and the +Europe party after only agreeing to do so last week. According to party leader Carlo Calendar, "the parts didn't fit." According to Reuters and Market News Publishing US, the alliance was formed in an effort to stop a more conservative government from taking office after the election on September 25.

 

Notably, gains in the EUR/USD the day before appeared to have been constrained by US President Joe Biden's displeasure of China's efforts to retake Taiwan and his censure of House Speaker Nancy Pelosi's trip to Taipei.

 

These actions caused the 10-year US Treasury rates, which had increased by 14 basis points (bps) the day before, to fall by around seven basis points (bps) to 2.75 percent. Wall Street also started Monday's trading day on a positive one before ending on a mixed note, albeit as of press time, S&P 500 Futures are showing minor gains.

 

Participants in the EUR/USD market may be interested in the second quarter's (Q2) US Nonfarm Productivity and Unit Labor Costs data. Forecasts suggest that US Nonfarm Productivity may rise to -4.6% from -7.3%, while Unit Labor Costs may decrease to 9.5% from 12.6%. The news regarding Taiwan and Russia will also be important for determining direction.


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