Euro and Pound Remain Strong Amid Economic Data
The Euro and Pound Sterling both hold near highs as their highest levels in over a year against the U.S. Dollar. This comes as the euro zone’s business activity data and upcoming wage growth figures draw significant attention. The Euro is currently trading at $1.1146, slightly below its peak of $1.11735, reached on Wednesday. This strength is largely attributed to the weakening of the U.S. Dollar, which has been influenced by a dovish Federal Reserve and signs of a weakening U.S. job market.
Impact of European Economic Developments
Recent European economic developments have kept the Euro in focus. Despite a preliminary survey revealing that German business activity contracted for the second consecutive month in August, the Euro rebounded after euro zone-wide data showed unexpected strength. The next crucial indicator is the wage growth data for the currency bloc, which is scheduled for release at 0900 GMT. This data will play a significant role in shaping expectations for the European Central Bank’s (ECB) future policy decisions.
Predictions for ECB Policy and Market Reactions
According to Andrzej Szczepaniak, a senior European economist at Nomura, a significant slowdown in euro area wage growth during the second quarter of 2024 could support the case for a rate cut in September. He noted that recent data from Germany and France suggests that wage growth may slow to below 4%, down from 4.7% in the first quarter.
Meanwhile, the Pound Sterling is trading steadily at $1.3095, having reached $1.31195 in the previous session, marking Euro and Pound a 13-month near highs, mean time, the U.S. Dollar has also firmed by 0.15% against the Japanese Yen, currently trading at 145.46.
Federal Reserve and Future Rate Cuts
The U.S. Dollar index, which measures the currency against the Euro, Sterling, and Yen, among others, increased by 0.1% to 101.22. The index had dipped to 100.92 on Wednesday, the lowest this year, as market confidence grows. The Federal Reserve is on track for rate cuts starting in September. Traders are now pricing in a 38% probability of a 50 basis point cut at the Fed’s September meeting, up from 33% a day earlier.
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