EUR/USD slides further on risk aversion, stronger dollar

Equities are down and bond rates are up as investors remain cautious due to expectations of additional monetary tightening by central banks. The July Fed minutes show a unanimous vote in favour of raising rates, but growing reluctance among board members regarding possible over-tightening.

Initial Jobless Claims came in at 239K, slightly more than predicted; the Philadelphia Fed Manufacturing Index for August improved. Surpassing predictions, the Eurozone registers a trade surplus of €23 billion. The Harmonized Index of Consumer Prices (HICP) for July will be released soon.

Fed meeting minutes, along with concerns about China’s economic slowdown, have sparked a risk-off impulse, causing the EUR/USD to record slight losses for the fifth day in a row and move further away from the 1.0900 level.

Federal Reserve minutes and China’s economic downturn put pressure on the pair, with just minimal support coming from favourable US data and the EU trade balance. Market mood is still negative, with global equities falling and rising bond yields. Investors still believed that central banks may tighten monetary conditions further.


The July Fed minutes revealed that the board members unanimously increased rates, despite some of them leaning neutral and expressing concerns about raising rates too high.

The majority of policymakers continue to worry about potential increases in inflation, but authorities are being cautious in how they conduct monetary policy, stressing that they will take into account the totality of available information to help clarify the extent to which the disinflation process was continuing.

The Atlanta Fed GDPNow model projects the US Q3 2023 GDP to be around 5.8%, up from 4.1% on August 8, following the release of Wednesday’s data. These factors have boosted the likelihood that the Federal Reserve will raise rates by 25 basis points at its forthcoming November meeting, according to the swaps market.

Initial Jobless Claims for the last week were reported by the US Bureau of Labour Statistics (BLS) on Thursday. These claims decreased to 239K, slightly below the expected 240K number. The Philadelphia Fed Manufacturing Index for August increased at the same time, rising to 12, which was higher than the 10 decrease predicted by analysts.

The trade balance for the Eurozone showed a surplus of €23 billion, which was higher than forecasts of €18.3 billion. The Harmonized Index of Consumer Prices (HICP) for July would be released by the EU before the weekend, with forecasts of 5.3% YoY and 0.3% MoM. At 5.5% YoY, Core HICP is anticipated to remain stable.