The euro's attempt to rebound last week failed. Despite the bulls' success in moving the pair towards the psychological resistance of 1.1000, the dollar came back strong to close the week lower, stabilizing around 1.0893. The US Federal Reserve, the European Central Bank, and the Bank of England all left interest rates unchanged last week, but they signalled different paths for the future of policy.
Obviously, US officials are prepared to cut rates in 2024, while European officials have said they will intensify their exit from pandemic-era stimulus. Also, The Fed is pivoting away from the sharpest interest rate hikes in a generation after so far containing rising inflation without causing a recession or a major cost to job growth. Meanwhile, Fed Chair Jerome Powell said Wednesday that policy makers are prepared to resume rate hikes if inflation pressures return, he and his colleagues released projections showing that a series of cuts are likely next year.
On the other hand, consumer prices in the United States of America increased in November thanks to the increases in housing costs and other costs of the services sector, which led to the maintenance of American inflation sufficiently stubborn to thwart any reduction in American interest rates by the Federal Reserve soon.
In general, enthusiasm for the euro has diminished due to the disappointing survey of the eurozone economy, which revealed the decrease in the activity in December and undermined the European Central Bank’s message on interest rates. Accordingly, the euro was softer against the dollar and the pound sterling after reading the manufacturing manufacturers ’index in the euro area of the S & P Global at 44.2 in December, which did not change in November, but less than the agreed expectations at 44.6. Moreover, the services were disappointing at 48.1, which were weaker than 48.7 in November and less than the expectations at 49. Shortly, this takes the installation of the purchasing managers in the euro area to 47, a decrease from 47.6 and less than expectations at 48.
Recently, the euro price against the EUR/USD and other currencies increased last Thursday after the European Central Bank issued relatively optimistic expectations to the economy, saying that these justify the stay of interest rates unchanged in the foreseeable future. However, these data question this situation and market bets will enhance the reduction of interest rates early in March.
On the other hand, Standard & Poor's Global Agency stated that business activity in the Eurozone declined at its fastest rate in 11 years, excluding the months of the pandemic in early 2020 only. Clearly, jobs were cut for the second consecutive month as companies reduced their operational capacity in line with the deterioration of order book conditions. Furthermore, future morale remains much lower than its long-term average despite a slight increase. Also, employment fell for the second consecutive month as companies reduced their capacity in line with a weak demand environment, reinforcing market expectations for interest rate cuts by the European Central Bank in 2024. Finally, the recent declines in employment are the first recorded since early 2021, indicating that the Labor market is slowing in line with slowing inflation rates.
EUR/USD technical Analysis Today:
According to the performance on the daily chart below, the return of the Euro to the US Dollar “EUR/USD” to the vicinity of the support level at 1.0800 signals a cessation of bullish aspirations in controlling and a return to its broader downward trajectory. Therefore, we expect the EUR/USD price to remain in its current path until the end of trading in 2023. This week, there will be interest in the reaction to the events at global central banks last week, along with anticipation of the announcement of the preferred US inflation reading for the Federal Reserve. On the other hand, during the same timeframe, bullish control over the direction of the EUR/USD will not return without a return to the vicinity of the psychological resistance level at 1.1000.
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