EUR/USD faces a slight correction from near 1.0890 due to US Dollar’s recovery. However, the Euro’s (EUR) performance against other peers has remained firm on multiple tailwinds. Faster-than-expected Eurozone Gross Domestic Product (GDP) growth in the third quarter of the year and hotter-than-forecasted inflation have forced traders to reassess bets supporting European Central Bank (ECB) larger-than-usual rate cut bets for the December policy meeting.
Eurostat showed on Wednesday that the Eurozone economy expanded by 0.9% compared to the same quarter of the preceding year, accelerating from the 0.6% growth in the previous quarter, mainly due to a surprise performance of the German economy, according to flash estimates. This has diminished the immediate risks of an economic downturn, although the outlook remains uncertain ahead of the US presidential election, which will take place on Tuesday.
Eurozone exports are expected to be hit if former President Donald Trump wins against current Vice President Kamala Harris. Trump has vowed for a universal tariff of 10% on all nations – except China, which is expected to face much higher tariffs – to boost in-house manufacturing capabilities.
Another factor supporting the EUR is the recent inflation uptick in the Eurozone. The preliminary Harmonized Index of Consumer Prices (HICP) accelerated more than expected to 2% in October from 1.7% in September.
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