Created on October 17, 2024

• Today is an important day for the euro against other major currencies, especially against the US dollar, which has plummeted to a support level of 1.0850, the lowest for the EUR/USD pair in more than two months.
• Ahead of the European Central Bank’s announcement, eurozone inflation figures will be released amid expectations of keeping rates low.
• On another front, and according to forex market trading and expectations for the US dollar under a new US administration after next month’s elections, Donald Trump, the Favorite to win the White House in November, has strengthened a number of policies seen as supportive of the US dollar.
• In a new interview, Trump rejected economists’ warnings that the tariffs he proposes would have a negative impact on the economy and raise inflation.

“For me, the most beautiful word in the dictionary is ‘tariff.’”

He wants to impose a 60% tax on imports from China and a flat 10% fee on the rest of the world. Economists say that raising the cost of imports will have a negative impact, raising domestic retail prices. In this regard, Tom Kenny, senior international economist at ANZ Bank, says, “The proposed 10-20% increase in tariffs across the board has the potential to be inflationary.”

“Tariffs tend to be inflationary, which would boost the value of the US dollar, and that’s why we expect the US dollar to be stronger in the first months of a Trump presidency compared to a Harris presidency,” Rabobank said. However, it warned that tariffs could eventually reduce productivity and growth potential. Furthermore, inflationary tariffs mean the Federal Reserve will need to exercise more caution in cutting US interest rates.

Trump’s response? Convince the Fed that it needs to cut rates anyway.

In his interview with Bloomberg, Trump indicated that he seeks greater influence at the Federal Reserve. However, he did not have a direct response to a question about whether he would seek to fire Fed Chairman Jerome Powell. He said he believes it is up to the president to tell the Fed chairman how he thinks interest rates should be changed. He added, “If you’re a very good president and you have common sense, you should be able to at least talk to him,”.

However, Trump stressed that the president should not be able to dictate policy to the Fed.

According to stock trading platforms, European stocks declined amid weak earnings. European stocks closed sharply lower on Wednesday, continuing the previous session’s losses amid pessimistic earnings from the eurozone’s largest companies. The Stoxx 50 index for the single currency area fell 0.7% to 4911, and the Stoxx 600 European index fell 0.2% to 520, with the latter supported by positive UK inflation. Also, ASML shares fell 5.1% to extend the previous session’s 15.6% decline after the chipmaker issued disappointing sales forecasts following its third-quarter earnings report.

Additionally, LVMH shares fell 3.7% after recording a decline in revenue during the third quarter, its first negative change since the COVID-19 pandemic, confirming concerns about declining demand in China. As a result, shares of Hermes and Kering fell 1.3% and 0.8%, respectively, while L’Oreal lost more than 2% after being downgraded by JP Morgan.

EUR/USD Technical analysis and forecast:

Ahead of today’s important events, the EUR/USD pair is stabilizing in a downward trend, and with the break of the 1.0880 support, it has previously shown that it supports the bears’ strong control of the trend and at the same time moves technical indicators towards oversold levels. Obviously, today’s reaction to the announcement of inflation figures in the eurozone and the European Central Bank’s announcement will determine the fate of performance in the coming days. The closest support levels to the current performance may reach support levels of 1.0820 and 1.0770, respectively. Conversely, and according to the daily chart performance, the resistance of 1.1000 will remain the key to the bulls regaining control. 

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