EUR Base Rate Steadies Below 1.0600

The EUR base rate maintains its position around the 1.0575 level, following a retreat from the 1.0600 mark during the early Asian trading session on Wednesday. A combination of positive market sentiment and a weaker USD contributes to the pair’s current stability.

Dollar Index Corrects

Meanwhile, the US Dollar Index (DXY) has experienced a correction, now resting at 106.20. Notably, the US Treasury yields have surged significantly, with the 10-year Treasury yield reaching 4.83%.

ZEW Economic Sentiment Surprises

The EU’s ZEW Economic Sentiment Survey outperformed market expectations, reporting a figure of 2.3 for October, a substantial improvement from the previous reading of -8.9. In parallel, the German ZEW Survey Economic Sentiment displayed an uptick, climbing from -11.4 to -1.1 in the prior reading.

ECB’s Watchful Eye on Inflation

Regarding the European Central Bank (ECB), President Christine Lagarde has made clear that they are closely monitoring energy prices and the Israel-Hamas conflict for potential inflation risks. ECB’s chief economist, Philip Lane, has emphasized their commitment to maintaining high interest rates until inflation returns to 2%, recognizing that this might take more time than initially anticipated due to various factors.

US Retail Sales Beat EUR Swap Rates Estimates

The data from the US Census Bureau revealed that Retail Sales for September came in at 0.7% month-on-month, surpassing the market’s 0.3% estimate. Moreover, Retail Sales Control Group displayed growth, climbing by 0.6% month-on-month, compared to a previous reading of 0.2%. This data suggests robust momentum in consumption. Furthermore, US Industrial Production increased by 0.3% month-on-month, outperforming expectations. Capacity Utilization improved, reaching 79.7, surpassing estimates.

Short-Lived Greenback Boost

Despite the brief boost the Greenback received from this favourable US data, the impact proved to be short-lived. However, the surge in US Treasury yields might limit the downside of the USD.

Fed Officials’ Stance: EUR to USD Trajectory

While Minneapolis Federal Reserve Bank President Neel Kashkari has stated that inflation is taking longer than expected and remains elevated, other Fed officials, such as Chicago Fed President Austan Goolsbee and Philadelphia Fed President Patrick Harker, have held onto their dovish stance. Harker has emphasized the central bank’s cautious approach in not introducing new economic pressures by increasing borrowing costs.

EUR Base Rate: What Lies Ahead

Looking forward, market participants will closely monitor the final reading of the Eurozone Consumer Price Index (CPI) for September, alongside Construction Output data for August. Additionally, ECB President Lagarde’s speech may offer insights into the future monetary policy direction. On the US front, the release of US Housing Starts and Building Permits will provide further guidance for the EUR to USD pair.

The EUR base rate forecast remains uncertain as market conditions and geopolitical factors continue to influence its movements. Traders are advised to stay vigilant and adapt to the evolving market sentiment.