FOREX Fundamental analysis for EUR/USD on October 25, 2024
Donald Trump has not yet won the US presidential election, information from Reuters about a possible acceleration of the ECB monetary easing cycle may turn out to be false, and the situation of the German economy is not as critical as it was thought. These factors prompted EUR/USD sellers to lock in profits before important events such as the publication of US employment data and the presidential election. EUR/USD has risen above the $1.0805 level, which may mean an upcoming consolidation, if not a correction.
Against the background of an increase in the US business activity index to 54.3 points and a second consecutive decline in the Eurozone composite PMI below 50, talk about the "exclusivity" of the American economy and differences in growth rates is getting louder. The IMF improved the forecast for the United States and lowered it for the Eurozone, indicating that the gap will only grow due to differences in labor productivity.
At the same time, investors' attention was attracted by positive developments in the German economy. Business activity exceeded expectations, and Deutsche Bank noted that the industry is not in a state of decline, and government warnings about a recession may be premature.
The question is whether the ECB needs to accelerate the easing cycle if the Eurozone's largest economy is showing signs of stabilization. Joachim Nagel stressed that the Central Bank should not rush into monetary expansion. Pierre Wunsch questions the need to discuss their reduction by 50 bps in December, and Madis Muller believes that the ECB is not behind schedule. Gabriel Makhlouf noted that only very negative data can change his mind.
Reuters insider information about the ECB's willingness to cut rates more actively pushed the EUR/USD exchange rate below 1.08, but if this is a rumor, maybe it's worth considering strengthening the euro in forex currency trading? The cost of hedging the risks of the euro's fall has risen to the highest since the French elections in 2017 and seems overstated.
As soon as Trump began to gain points in the pre-election polls, investors rushed to assess the prospect of the so-called "Trump trade". According to Standard Chartered, it contributed 60% to the dollar's growth in October. The dollar was planning to end the month with the best dynamics in the last two years, but the fact that Trump has not yet won eased the pressure on EUR/USD.
Now EUR/USD is recording profit on shorts, which creates opportunities for stabilization of the exchange rate or rollback. Sellers are likely to use any EUR/USD rally to the 1.0865 and 1.0905 levels to form short positions.