FOREX fundamental analysis for EUR/USD on October 25, 2022
Investors are trying to use any more or less significant positive reason to justify the upward movement of EUR/USD. This is the appointment of Rushi Sunak to the post of the British Prime Minister, the disappointing data on the US business activity and the hope that the Fed will not raise the rate by more than 50 basis points in November.
As for analysts, 86 out of 90 experts polled by Reuters are predicting a rate hike of 75 basis points on November 3, while not ruling out further resetting the rate of monetary restriction.
Once again, the markets are wishful thinking. Even if the Fed slows down monetary policy tightening, it does not mean a pause or abandonment of the hawkish course. According to experts, in order for the regulator to adjust monetary policy, inflation would have to slip from the current 8% to at least 4.4%.
But now the proponents of easing are presenting the recent statistics on U.S. business activity, which has been declining for the fourth month in a row, as an argument.
Investors have even chosen not to react to the weak Eurozone purchasing managers' indices, although business activity is signaling a recession in the European economy.
Actually, PMIs are getting weaker all over the world, which suggests that the economy is in a global recession, and that is a serious factor to support the dollar. But so far investors are reacting vividly to the short-term drivers, like the stock indices rebound or the end of the political crisis in Britain.
Also the expectations of ECB rate hike by 75 basis points support the euro growth. Moreover, there are rumors in the market that the European regulator will launch a quantitative tightening program. On the other hand, the rate differential between the ECB and the Fed is so obvious that it is unlikely to allow EUR/USD to move to a long-term strengthening. Trading from forex levels suggests selling the pair on the rise to 0.992; 0.996 and 1.0.
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