EUR/USD Steadies Ahead of Lagarde's ECB Policy Speech

The EUR/USD pair maintained its level and traded near 1.1815[1] in Thursday's Asian session, with the US Dollar steady after recently dropping to its lowest level in over three years. Some reports[2] note that the markets are yet to digest the dovish way of the Federal Reserve and speculation of the Fed about additional cuts in rate. It is noted that the interest is now shifting towards the statements of European Central Bank President Christine Lagarde[3], who will address later on today. It is assumed that her remarks could provide a new orientation to the Euro as traders get a feel of the monetary policy.

Market reports[4] indicate that the US Federal Reserve reduced interest rates by 25 basis points during its meeting on Wednesday in September in accordance with the expectations. Market observers indicated that the policymakers indicated that the borrowing rates will continue minimally decreasing in the remaining part of the year. It was reported that Fed Chair Jerome Powell[5] told the move as precaution on the back of a declining labour market but there is no urgency to increase the rate of easing. The approach of the Central Bank[6] is believed to balance between supporting growth and ensuring inflation risks are held down.

Market reports[7] pointed out that Fed Chair Powell emphasized that when projecting the path of interest rates, they are not commitments, and that inflation pressures are a threat. He observed that the Fed will make decisions to reduce the rates on a meeting-by-meeting basis. His less dovish position can give the US dollar near term support taking away further downplay.

The most recent eurozone inflation rates[8] are thought to have supported the ECB by not lowering interest rates during their recent meeting. Market commentators observe that in the market, there is growing betting that the ECB[9] may be finished with rate cuts in the foreseeable future, which would provide some support to the euro against the US dollar. Market reports note that a policy statement by the ECB policymakers[10] Martins Kazaks and Gediminas Simkus this week suggested that no additional reductions were necessary now, but did not eliminate them. Vice President Luis de Guindos[11] provided that existing rates are suitable.

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NZD/USD Slides as Kiwi GDP Data Disappoints, Rate Cuts Eyed

New Zealand NZD/USD fell and traded at 0.5935[12] in the early Asian session on Thursday after the latest GDP data of New Zealand was lower than anticipated, and it placed a burden on the Kiwi. The softer growth data is believed to have put strain on the US dollar[13] as investors became wary. Market observers[14] point out that in the future, the focus is on the United States where major releases, such as the weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index and the Conference Board Leading Index are scheduled later in the day and may move the market direction in the short run.

Market reports[15] indicate that the economy of New Zealand contracted in the second quarter as the GDP declined by 0.9% points quarter to quarter as per the statistics of Statistics New Zealand. This is lower than the anticipated 0.3% fall observed by market observers and comes after a revised 0.9% increment in the first quarter which rose to 0.8% as initially reported. It has been reported that during the annual period the GDP decreased by 0.6% in Q2, which was the same decline as the first quarter revised, yet not as per the forecasts of zero growth and hence the country still faces a challenge of restoring its economy.

Market reports[16] point out that New Zealand's weaker GDP report might help the Reserve Bank to hold on the opinion that it is necessary to continue with the easing. Some analysts[17] noted that markets are anticipating that the RBNZ will lower the cash rate by 25 basis points in two more instances in the current year that will burden the New Zealand dollar and strain the currency pair.

Market reports[18] point out that the US Federal Reserve reduced its main interest rate by 0.25 pointing out this as the first time since December that it had reduced its interest rate. Reports note that the policymakers indicated two additional reductions in the year as well. It is assumed that the decision was heavily anticipated, despite US President Donald Trump[19] pressing to make a greater reduction. Fed Chair Jerome Powell[20] claimed that the action was a sign of the weakening of the labour market, and past anxieties over inflation led by tariffs had held rates in limbo. Market commentators[21] believe that the reduction points to the Fed move toward promoting economic growth because global uncertainties take their toll on the prospects.

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USD/CAD Rises Amid Mixed Signals From Central Banks

USD/CAD continued edging higher for a second day and traded near 1.3770[22] in Thursday's Asian session. The move is believed to have occurred as the US dollar[23] got stronger due to the stronger inflation projections which minimized the chances of more Federal Reserve rate cuts. Market reports[24] indicate that the latest outlook projected by the Fed indicated that the inflation will complete the year at 3%, higher than the 2% target. Some analysts believe that this moderated market was optimistic regarding aggressive easing and the greenback had an upper hand over the Canadian Dollar in the opening trade.

Market reports[25] point out that the Federal Reserve reduced interest rates by 25 basis points, the first such reduction in this year, and suggested that it can cut rates again by 50 basis points before the year-end, which was a little higher than the expectations made in June. Reports[26] note that the FOMC most recent forecasts indicate two further cuts in 2025. Some analysts[27] believe that more optimistic growth and employment, and core inflation forecasts cause concerns about the availability of further rate cuts in 2013, so it makes markets sceptical about the longer-term outlook.

Market reports[28] note that the Fed Chair Jerome Powell emphasized the deteriorating labour market conditions as the main factor why the Federal Reserve opted to reduce interest rates. Market observers point out that the policymakers have chosen a reduction since they have maintained rates constant since December, between counterbalancing the subdued economic conditions and previous fears of tariff-related inflation pressures.

Market reports[29] note that the Bank of Canada (BoC) reduced its benchmark interest rate by 25 basis points down to 2.50% on Wednesday. The Central bank in its Monetary Policy Statement[30] pointed out three important changes since July. Some analysts[31] believe that the labour market in Canada has become even weaker, the inflation pressures are relieved, and any threat of increasing prices is declined by the elimination of most of the retaliatory tariffs. Market commentators[32] point out that the policymakers indicated that these aspects had reversed the scales of risks, which made them choose to provide another rate cut.

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GBP/USD Slips as BoE Decision Expected, Dollar Regains Strength

The GBP/USD pair slipped against the Dollar and traded near 1.3615[33] in Thursday's early European hours, as the US Dollar regained strength. Market observers[34] note that markets are now looking forward to the policy decision of the Bank of England (BoE) that follows later in the day but it is generally believed that markets do not suspect that the interest rates could be increased. It is noted that investors will keenly monitor any indications on the direction of the future of the borrowing costs and the economic future.

Market reports[35] indicate that at its meeting in September 2008 the US Federal Reserve reduced interest rates by 25 basis points bringing the target range down to 4.00%-4.25%. Some analysts[36] think that it is the first cut of the year by the Fed. Reports note that Chair Jerome Powell termed the move as a risk management measure and this indicated that no urgency was required regarding additional cuts. His warning tones provided partial backing to the US Dollar and curtailed the profits of major currencies and markets were left guessing how the policy could be eased in future.

Market commentators[37] note that most analysts have presumed that the Monetary Policy Committee of BoE will maintain the interest rates at 4% on Thursday. Reportedly, the MPC reduced the rates by 0.25% to 4.0%[38] in its final meeting in August. Market observers note that the markets have now come to the view that the Bank will maintain the rates up to the end of the year. Market observers[39] note that investors are expected to view the probability of a further reduction entirely priced in by April 2026, indicating that they believe a very moderate stance will be taken on any further monetary easing.

Market observers[40] point out that markets will seek guidance on Friday to the UK August Retail Sales report. The headline sales are believed to increase by 0.4% on the month with Retail Sales without fuel projected to increase by 0.3%. Market commentators believe that the higher-than-anticipated numbers would be a good indication of robust consumer spending, which would provide relief to the pound. A positive surprise will help GBP/USD exchange rate to increase in the near future as traders will evaluate the power of the UK retail industry.

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