EURUSD loses 0,5%, lowest since mid-March 💵 Comments from ECB and Fed

4:37 PM September 25, 2023

The EURUSD f/x rate has been experiencing declines over last weeks and is currently trading as low as 1.0594, losing more than 0,4% Meanwhile, central bankers, including Christine Lagarde, head of the ECB, spoke on the US and Eurozone economies. Goolsbee's rather hawkish comments supported the US dollar.

ECB's Lagarde

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  • Labor market final cools and adjusts but remains very, very solid
  • Dynamically falling money supply is not yet a signal of a deep recession
  • Governments should pull back on policies that support the energy market
  • Price pressures in national economies generally remain strong
  • Inflation is admittedly declining but is still expected to remain too high for too long
  • ECB has made further progress on inflation

ECB's Schnabel

  • The situation regarding the inflation problem is not yet fully clear
  • Shrinking economic stimulus does not herald a deep slowdown, rather signals a broader portfolio adjustment
  • Economic activity in the eurozone is evidently cooling off

Goolsbee Fed

  • A soft landing is still possible but there are a lot of risk factors
  • We cannot change the inflation target until the 2% target is met
  • If the Fed were to abandon the 2% target policy, the target might never be met
  • The current situation is unique because inflation is falling without an increase in unemployment
  • The risk of inflation remaining too high currently outweighs everything else
  • Monetary policy takes time to translate into the economy
  • It looks as if rates are going to stay high for longer than markets expected
  • The question is no longer how high rates will rise but how long they will have to stay that way
  • Concerns about an inverted yield curve do not take into account changes in the post-pandemic economy

EURUSD failed to stay above 1.06 and settled below the 38.2 Fibonacci retracement of the upward wave from the fall of 2022, and in an extreme scenario could test 1.02 in the medium term where we see another 61.8 Fibo retracement.

Source: xStation5

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