The EURUSD Exchange Rate saw selling last week after Fed Chair Jerome Powell and co. said a December rate cut was not a certainty.
EURUSD – Weekly Chart
The EURUSD saw a sharp move last week from almost 1.1700 to trade around 1.1520. That move also secured a close below the key support at 1.1575. The door is open for further selling in the euro this week.
European Central Bank Chief Christine Lagarde is set to talk on Tuesday at 3:40 pm HKT. Markets will be looking for clues on monetary policy and the economy from Lagarde.
Her recent comments have noted that wage indicators show slowing growth into year-end, while longer-term inflation expectations should be around 2%. She noted that a “stronger euro could bring down inflation further than expected”. That could be an issue if recent selling continues in the single currency.
The euro fell last week after the Federal Reserve’s recent interest rate cut. The central bank warned that a December cut is not a done deal, which led to pressure on global currencies against the greenback.
Voting members of the Federal Reserve bank showed their discomfort with the bank’s decision to cut interest rates. That came after another Fed Governor, Christopher Waller, made the case for further easing to shore up a weakening labor market.
“I did not see a need to cut rates this week,” said Dallas Fed President Lorie Logan last week. “I’d find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more rapidly”.
“Given the move that we just made, I think we’re right around my estimate of neutral: I think we’re barely restrictive if at all,” said Cleveland Fed member Beth Hammack.
“I do think we need to maintain some amount of restriction to help bring inflation back down to target,” Hammack added.
The recent cut may also have been affected by continuing pressure from President Donald Trump to cut rates. Waller is actually a leading candidate for the top job when Jerome Powell steps down, and may be using his votes to please the President.
However, Powell’s recent comments on AI have said that job creation is “near zero” as tech companies start to slash jobs and halt future hiring due to AI gains. Meta and Amazon are among the companies that have recently cut staff and frozen future hiring.
