On the U.S. side, the Federal Reserve continues to maintain a cautious, data-dependent stance. Although the unemployment rate has risen to 4.6%, initial jobless claims remain very low (199k), indicating that the U.S. labour market continues to demonstrate resilience. At the same time, inflation (2.7%) - while easing from its peak - has yet to return sustainably to the Fed's target range.
EURUSD continues to maintain its recovery momentum as the USD weakens after expectations that the Fed will begin its rate-cutting cycle are reinforced, while the macro environment in Europe shows signs of stabilizing but remains far from solid. The current movement reflects a recalibration of interest-rate and growth expectations between the two economies, rather than a shift clearly favouring the Euro. According to Eurostat, annual HICP inflation in the Eurozone is moving closer to the ECB's 2% target (October inflation at 2.1%).
The euro has recorded two consecutive sessions of recovery, pushing the EURUSD exchange rate to around 1.166, as market sentiment improves on expectations that the U.S. Federal Reserve (Fed) will accelerate its pace of interest rate cuts in upcoming meetings. Capital outflows from the U.S. dollar - which had strengthened sharply during the recent risk-off phase - are providing room for the euro to rebound, even though the fundamental backdrop for the common currency remains fragile.
Although the euro has staged a two-day rebound, the current macro landscape continues to create a clear push-and-pull dynamic for EURUSD. On the U.S. side, growth remains resilient with household demand still solid, while Europe shows divergence between a relatively stable services sector and a sluggish manufacturing base. Last week, U.S. GDP grew 3.8% q/q, durable goods orders unexpectedly jumped 2.9%, housing indicators (New and Pending Home Sales) beat forecasts, and Core PCE held steady at 0.2% m/m.
