EUR/USD Pressured by Dollar, Awaits Fed, Eurozone Data

EUR/USD continued to trade near 1.1730[1] in early Monday’s European session, lower for a fourth straight day. The pair is believed to be under pressure as the US Dollar gains strength, boosted by the fact that the Federal Reserve[2] (Fed) announced last week that it would take up its rate-cutting cycle again. Market commentators point out that investors are closely monitoring future information and occurrences as the Eurozone Consumer Confidence[3] report and future remarks of the Federal Reserve officials are likely to influence the mood of the market and offer a new path to the currency pair.

Market reports[4] note that the Federal Reserve reduced the interest rates by 25 basis points last week as anticipated but indicated that there was no urgency to reduce the cost of borrowing soon. Market commentators[5] point out that the Fed Chair Jerome Powell referred to the move by stating that it was a risk management cut meant to take care of a weakening labour market, even though inflation is still higher than it should be. His voice was not as dovish as most investors were wishing and it gave the US dollar some strength and strained the major pairs of currencies at the start of the trading day.

Market reports[6] note that the Fed Chair Jerome Powell along with other officials will address the market this week, and the markets will observe their opinion on the market and policies. Some analysts[7] believe that independence of the Federal Reserve could cap short run dollar gains as the traders calculate the potential strain on its decision-making and overall economic direction.

Market commentators[8] note that the European central bank (ECB) maintained its three major interest rates at the same level at the September meeting and followed a conservative, data-driven policy. Market reports point out the Vice President Luis de Guindos reported that the rate-cutting cycle which started in June of 2024 might not be finished yet. Nevertheless, as Martins Kazaks, the member of the Governing Council emphasized, it is possible to allow some inflation of a little bit less than 2%. He also said that the ECB needs to think heavily on what it will do next before deciding on any other changes to the policies.

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GBP/USD Edges Higher Amid BoE, Fiscal Concern

The GBP/USD pair edged higher and recovered by trading around 1.3465[9] in Monday’s early Asian session after three days of losses. It is believed that although the move would provide some relief, the gains made by Sterling might be limited by concerns about the ability of a UK Finance Minister Rachel Reeves[10] to control the budget. Market commentators[11] indicate that the investors will also be interested in the Bank of England (BoE) with Chief Economist Huw Pill speaking later in the day, which is likely to give new hints on the direction of the policy.

Market reports[12] point out that the UK public sector spending has increased to high levels with public sector borrowing of 18 billion in August which is high in relation to the month before, that is last month and is much higher than the expected levels of 12.8 billion. Market commentators note that the numbers indicate the increasing fiscal risks and might put pressure on the pound. Last week the BoE[13] maintained the interest rates at 4.0% after reducing the rate by 25 bps in August, citing poor growth and a less strong jobs market. Market reports[14] observe that policymakers gave an indication of increased light-hearted easing in the future, which can aid stabilize Sterling and reduce further losses in the currency.

Market reports[15] point out that the US Federal Reserve reduced interest rates last week in an unsurprising move and pointed out that there were two further cuts that might be made before the end of the year. Fed Chair Jerome Powell[16] also characterized the move as a risk-management move and emphasized that future moves would be determined meeting after meeting. His remarks indicate that Fed is hesitant and not starting an aggressive cycle of easing and therefore the anticipations of further or more rapid cuts might not meet the measured strategy by the central bank.

Market commentators[17] expect traders to pay attention to the remarks of Federal Reserve leaders later in the day, seeking the indications of the US interest rate perspective. Some analysts[18] think that any soft tones would erode the US dollar, which would support the pound against the greenback and may lift the GBP/USD pair at the following sessions.

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NZD/USD Weak on China Rates, Fed Stance, and TikTok Deal

NZD/USD declined for the fourth straight session and traded near 0.5860[19] in Monday’s Asian session. The pair is believed to have remained under pressure following the one-and five-year Loan Prime Rates[20] maintained at 3.00 and 3.50 by the People’s Bank of China (PBOC). Market commentators[21] believe that since China is New Zealand's major trading partner, events taking place in the Chinese economy tend to affect the performance of the Kiwi dollar in the international currency markets.

Market reports[22] note that the White House indicated that the US companies will control the algorithm of TikTok’s as the Americans occupy six out of seven board spots of its US subsidiary. Press Secretary Karoline Leavitt commented that the deal may be closed during the next few days, however, Beijing has not responded yet. Meanwhile, the New Zealand dollar is experiencing pressure because of the anticipation that the Reserve Bank of New Zealand (RBNZ)[23] is likely to become more dovish. Some analysts[24] believe that weaker growth in Q2 and bigger trade gap have caused some analysts to conclude that the markets are pricing a 25bp cut in October, with a 25 per cent chance of a 50bp cut.

Market commentators[25] note that the NZD/USD is being weakened by the US dollar which is stabilizing on the wary of the rate direction of the Federal Reserve. Market reports[26] point out Fed Chair Jerome Powell stated that there is no rush to lower the rates, and it will make decisions on a case-to-case basis. It is noted that the most recent Fed dot plot[27] indicated that there would be two additional rate cuts in 2010. Market observers[28] believe that the traders are now looking at the PCE Price Index later this week, which likely will prove decreased inflation and give the direction of the further actions of the Fed.

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USD/CAD Recovers as Fed Signals No Rush Cuts

USD/CAD recovered from the recent declines and traded near 1.3800[29] in Monday’s Asian session. The US dollar is believed to have gained ground with the Federal Reserve (Fed)[30] indicating that there was no rush to make further interest rate cuts, after the expected quarter-point cut, which occurred last week. Market commentators[31] note that the Fed was careful with its policy, and this increased the demand of the greenback making it to be whipped off the market compared to most of its competitors. Meanwhile, traders are kept on the alert to new economic information and oil price trends, which can most frequently determine the performance of the Canadian dollar[32].

Market reports[33] note that the US Dollar Index (DXY) that measures the Dollar against six major currencies is moving up and exchanges around 97.70. Market commentators[34] point out that the focus has shifted to the next release of Personal Consumption Expenditures (PCE) Price Index that will be released later this week. Some analysts[35] believe that since it is the Federal Reserve's preferred gauge of inflation, the statistics will be subject to keen interest and that it will indicate subdued price pressures, to boost a restraining view of monetary policy.

Market reports[36] note that the Federal Reserve, under the leadership of Jerome Powell, reduced interest rates in the first half-year since December based on labour market weakness and inflationary issues that arose due to tariffs. Powell[37] pointed out that there is no haste to change rates further noting that it should be a meeting-by-meeting strategy. The most recent Fed’s dot plot[38] demonstrated the possibility of two more cuts in the rate next year as the Fed policy makers juggle between the risks pertaining to growth and the risks pertaining to inflation.

Market commentators[39] point out that the Canadian retail sales are estimated to have increased 1.0% in August following a decline of 0.8% in July, providing relief to the Canadian Dollar and lessening fears of further and intensive Bank of Canada (BoC) easing actions. Market reports[40] note that the BoC reduced its rate by 25 bps to 2.50% last week stating weaker jobs, weaker inflation and the company eliminated most of its retaliatory tariffs which has restricted potential upside risk to price growth.

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