Euro: Fed rate outlook and ECB credit signals in focus - Danske Bank
Danske Bank’s Danske Research Team notes that EUR/USD traded sharply lower, nearing year-to-date lows, as broad-based Euro weakness dominated G10 FX.
Danske Bank's research team highlights that EUR/USD experienced a sharp decline, reaching near-year-to-date lows as the euro faced broad weakness across the G10 currencies. The Federal Reserve is expected to maintain interest rates unchanged in their upcoming decision but reiterated a commitment to bring inflation back to target, with two more hikes anticipated in December and March.
Euro area lending data indicate that banks have tightened credit standards more than anticipated, but the net share reporting a tightening remains low and mainly driven by French banks. This suggests that the ECB's tightening efforts have only modestly increased credit standards, and the currency remains capable of handling higher interest rates.
The US dollar showed mixed performance, with AUD/USD rising to a fresh high since September 23 on stronger Australian CPI data, while USD/JPY benefited from a pause after a three-day rally. Gold continued its downward trend below $4,050 ahead of the Fed's decision, and the Zcash ETF maintained buying pressure on expectations of stronger US dollar performance.
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