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In the recent market analysis, the USD has displayed strength, causing the EUR/USD major currency pair to experience downward pressure, with the current quote standing at 1.0970.
One of the key factors contributing to this situation is the proactive stance taken by the European Central Bank (ECB) in response to the Federal Reserve’s actions. The ECB decided to raise interest rates by 25 basis points to 4.25% per annum. Additionally, the central bank is strategically reducing the portfolio of securities acquired through the anti-crisis asset purchase programme, with plans to reinvest the funds. The ECB remains committed to exploring all necessary measures to bring inflation back to its targeted 2%.
While the ECB acknowledges a high assessment of core inflation, there are indications of a slight slowdown in the rally. The region’s financial conditions have tightened, prompting the ECB to prioritize maintaining rates at a restrictive level.
The prevailing view is that inflation remains the primary risk factor according to the ECB’s interim conclusion. As a result, the regulator has kept the option of implementing further actions open for September, with market expectations leaning towards a potential increase to 4.5% per annum by year-end.
On the other hand, the US experienced a notable GDP growth of 2.4% in the second quarter, a considerable improvement compared to the beginning of the year.
Looking ahead, Friday’s focus will be on the release of US Core PCE statistics, which serves as a crucial inflationary component that the Federal Reserve relies upon when making monetary decisions. Additionally, data on income and personal spending of Americans will also be published, adding further interest to the day’s market developments.
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