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The Euro (EUR) commenced the new trading week on a positive note against the US Dollar (USD), leading to an extension of EUR/USD’s rebound from the 1.0500 level, ultimately regaining the 1.0540 zone on Monday.
The US Dollar (USD) experienced a slight decline, retreating from last week’s peak near 106.80 as measured by the USD Index (DXY). This shift occurred amidst an improved market sentiment favoring risk assets. However, the Federal Reserve’s (Fed) steadfast stance on maintaining higher interest rates remained unchanged.
The focus remained on monetary policy, with investors expecting the Fed to uphold its decision of not adjusting interest rates for the rest of the year. Simultaneously, market participants contemplated the possibility of the European Central Bank (ECB) halting policy modifications. This consideration arose despite inflation levels surpassing the bank’s target and mounting concerns about potential economic downturns or stagflation in the region.
Additionally, speculators reduced their net long positions in the week ending October 10, reaching levels last observed in late October 2022. Market participants continued to factor in the likelihood that the ECB’s tightening cycle might have peaked, contrasting with the persistent belief that the Fed might maintain its restrictive stance for a longer duration than initially anticipated.
On the domestic front, Germany’s Wholesale Prices rose by 0.2% MoM in September and contracted by 4.1% over the last twelve months. Meanwhile, the trade surplus in the broader Eurozone expanded to €6.7B in August.
In the US, the NY Empire State Index tracking regional manufacturing activities is scheduled, along with September’s Monthly Budget Statement.
