This Week: EURUSD to reach fresh 6-month lows?

The world’s most-traded FX pair has erased all of its year-to-date gains and is trading around its lowest levels since March.

Bloomberg’s FX model forecasts a 75% chance that EURUSD will trade within the 1.0526 – 1.0737 range in this final week before heading into the final quarter of 2023.

Inflation data out of Germany, the Eurozone, and the US will be used to decipher which central bank, between the European Central Bank (ECB) or the Federal Reserve (Fed), has the clearer path towards another rate hike.

Markets are set to bolster the currency of the central bank that’s likelier to hike.

Events Watchlist

• Thursday, September 28th: Germany consumer price index (CPI)

Germany’s September CPI numbers are set to moderate lower from August, except for the month-on-month print which is forecasted by economists to hold steady at 0.3%.

Higher-than-expected inflation in the Eurozone’s largest economy which forces the ECB into a hike may translate into some relief for EURUSD.

• Thursday, September 28th: Speeches by Fed officials

Several Fed officials, including Fed Chair Jerome Powell, are due to make public speeches, a week after pressing home their intent to keep US interest rates higher for longer.

Should markets take greater heed to this “higher for longer” messaging, that could further boost the US dollar while dragging EURUSD even lower.

• Friday, September 29th: Eurozone CPI, Germany unemployment, US PCE deflator

EURUSD is likely to fall on a worsening jobs market in Germany, which is already expecting to post an economic contraction for 2023, coupled with lower-than-expected CPI data for the broader Eurozone.

Across the Atlantic, higher-than-expected PCE Deflators which pave the way for another Fed rate hike may embolden dollar bulls.

Here’s comprehensive list of other key economic data and events due this week:

Monday, September 25

• EUR: Germany IFO business climate (Sept)
• USD: Speech by Minneapolis Fed President Neel Kashkari

Tuesday, September 26

• EUR: Speeches by ECB’s Robert Holzmann, Philip Lane
• USD: US consumer confidence (Sept)

Wednesday, September 27

• JPY: Bank of Japan meeting minutes
• CNH: China industrial profits (Aug)
• EUR: Germany consumer confidence (Oct)

Thursday, September 28

• AUD: Australia retail sales (Aug)
• EUR: Germany CPI (Sept); Eurozone economic and consumer confidence (Sept)
• USD: US weekly initial jobless claims; 3Q GDP (3rd estimate)
• USD: Speeches by Fed Chair Jerome Powell, Richmond Fed President Tom Barkin; Chicago Fed President Austan Goolsbee
• Nike quarterly earnings

Friday, September 29

• JPY: Tokyo CPI (Sept); jobless rate, industrial production, and retail sales (Aug)
• GBP: UK 2Q GDP (final)
• EUR: Eurozone CPI (Sept); Germany unemployment (Sept)
• USD: US PCE deflator, consumer spending (Aug); speech by New York Fed President John Williams