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The euro continues to face a challenging environment in the short term. The currency has struggled to regain ground against a U.S. dollar that remains firmly supported, a dynamic reflected in EUR/USD, which has now recorded three consecutive losing sessions and a decline of roughly 0.6%.
Today's session has not been particularly favorable for the euro. Recent EUR/USD price action shows a decline of approximately 0.2% in favor of the U.S. dollar, a move largely driven by the release of the U.S. PCE inflation report and the recent recovery seen in the bond market.
PCE may still matter to policymakers at the Fed, but for traders looking for a genuine volatility event, CPI has been the far more reliable release.
The Japanese yen was the weakest currency on Thursday, with traders lowering their expectations of a BOJ hike in light of Trump's tariffs. GBP/JPY was the outperformer as traders are also lowering their expectations of BOE cuts. But whether USD/JPY can break out above its 200-day EMA and the 152 handle likely requires a soft set of inflation figures from Tokyo and a stronger-than-expected US PCE report today.
USD/JPY no longer carves a series of higher highs and lows as it pulls back ahead of the monthly high (151.31).
EURUSD, USDJPY Outlook: As we step into March next week, investors are adopting a cautious approach toward the markets. The commencement of tariffs against Canada, Mexico, and China, along with tariff threats against the EU, is increasing currency market risk against the US Dollar.
GBPUSD, Dow Forecast: Despite the Federal Reserve’s decision to hold rates and Trump’s tariff threats, GBPUSD remains near the 1.24 mark, while the Dow Jones trades near its record highs. Will these rallies continue?
The update to the US PCE index is anticipated to show a rise in both the headline and core reading.
The depreciation in USD/CAD may turn out to be temporary as the US Personal Consumption Expenditure (PCE) Price Index is anticipated to show sticky inflation.
The update to the US PCE is anticipated to show a slowdown in both the headline and core reading for inflation.
The update to the PCE report is anticipated to show the headline reading narrowing to 2.3% in August from 2.5% per annum the month prior.
Trades want to sell the USD, but that it causing a headache for the SNB who want a lower Swiss franc. And Some already estimate that the central bank is active in the FX market to defend the USD/CHF at 0.84. And that puts the SNB interest meeting, US GDP, PMI, PCE reports in focus, alongside the slew Fed members hitting the wires.
Nvidia’s earnings report on Thursday has the potential to drive sentiment for the Nasdaq 100, particularly if it misses estimates for the first quarter in seven. Traders will then focus on the PCE inflation report on Friday to assess Fed policy – assuming Jerome Powell hasn’t made it crystal clear what to expect at his Jackson Hole speech later today. Which seems unlikely.
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