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Euro edges lower below 1.1700 despite fading Fed hike odds

The EUR/USD pair posts modest losses around 1.1675 during the early Asian session on Thursday. The Euro (EUR) edges lower against the US Dollar (USD) after experiencing a sharp surge in the previous session.

Euro edges lower below 1.1700 despite fading Fed hike odds

The Euro (EUR) slipped below 1.1700 against the US Dollar (USD) on Thursday, despite fading expectations of a Federal Reserve (Fed) interest rate hike. The EUR/USD pair dropped around 1.1675 during the early Asian session. The Greenback benefited from softer US economic data and Federal Reserve minutes, which suggested that a rate increase might not be imminent without further progress in reducing inflation.

The US central bank maintained the benchmark interest rate between 3.5%-3.75% following the July policy meeting, with dissenters urging for quicker action to align inflation with the Fed's 2% target. Recent data showed modest monthly price increases, but all major indicators still displayed inflation well above the target. As market expectations for a Fed rate hike at the upcoming meeting decreased to 32.7%, from 47% a month earlier, the Euro gained a tailwind.

Meanwhile, the European Central Bank (ECB) was expected to maintain its hiking cycle, with a 25 basis point (bps) increase to 2.50% at the September 9 policy meeting. Analysts noted that improved growth expectations in the Eurozone were validating the initial rate re-pricing driven by higher inflation. EUR/USD remained bullish in the near term, with the pair trading above the 100-day simple moving average and the Bollinger middle band.

The immediate resistance lay at the upper Bollinger band at 1.1685, while support was found at 1.1675 and the 100-day SMA near 1.1570.

Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.

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The net external financial assets of the nation decreased by nearly $700 billion. This decrease is attributed to the stock market boom in the second quarter. According to the Bank of Korea on July 7, the net external financial assets, also referred to as ‘pure external financial assets,’ totaled $649.1 billion as of the end of June. This represents a decrease of $677.1 billion from the end of March. The term ‘net external financial assets’ refers to the difference between external financial assets and external financial liabilities. It is calculated by subtracting the total amount of money that the nation owes to foreigners, such as foreign exchange reserves, from the total amount of money that foreigners owe to the nation, including direct and indirect investments. At the end of June, external financial assets amounted to $1.98 trillion, a decrease of $350.8 billion from the end of March. External financial liabilities also decreased by $326.3 billion to $1.33 trillion during the same period. The decrease in external financial assets was mainly due to a $476.6 billion decrease in portfolio investment, which includes stock and bond investments. The decline in the stock market, as represented by the KOSPI, which fell by 12.2% from 2,754.18 at the end of March to 2,415.38 at the end of June, affected this decrease. In contrast, direct investment increased by $89.7 billion. The decrease in external financial liabilities was driven by a $364.7 billion decrease in direct investment. The won-dollar exchange rate, which averaged 1,250.1 won per dollar in the second quarter, was 6.9 won lower than the average of 1,256.0 won per dollar in the first quarter. The Bank of Korea stated that "the decrease in net external financial assets is due to the decline in stock prices and the appreciation of the dollar."

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