ECB Rate Cuts Coming, As Inflation Expectations Fall – EUR/USD Down
The European and Asian sessions today were sluggish, as traders have been more cautious awaiting more guidance from the FED and the economic data. The USD is trading little altered after a modest decline early this morning, while Treasury rates have also recovered from early lows. 10-year bond rates slipped lower to 4.12% earlier, but have since recovered and are trading around 4.17%. This is also helping to support the dollar at the moment.
USD/JPY had fallen below 148.40 last night where we had left a buy pending order, but it reversed higher and is currently trading back up to 148.75, reaching the TP target of our forex signal. EUR/USD is down 0.2% at 1.0725 as the downtrend continues this week. ECB members continue to make dovish comments, acknowledging that inflation has slowed, with ECB’s de Cos saying that he is confident inflation is moving back to the target. The ECB consumer survey below also showed lower expectations regarding inflation.
The Latest ECB Consumer Expectations Survey from December 2023
- Perceived Inflation (Previous 12 Months):
- Median rate of perceived inflation over the previous 12 months was 6.9%.
- This represents a decrease from the previous survey where it was reported as 7.6%.
- Expected Inflation (Next 12 Months):
- Median expectations for inflation over the next 12 months were 3.2%.
- This indicates a decrease from the previous survey where it was reported as 3.5%.
- Nominal Income Growth Expectations:
- Consumer expectations for nominal income growth over the next 12 months remained unchanged at 1.2%.
- Nominal Spending Growth Expectations:
- Expectations for nominal spending growth over the next 12 months also remained unchanged at 3.6%.
The economy is also slowing further in Europe, as Eurozone retail sales showed today. They decreased by 0.8% year on year, with Germany potentially accounting for a large portion of the decline. In December, retail food sales were down 1.6%, while non-food retail sales fell 1.0%.
Latest data released by Eurostat – 6 February 2024
- December retail sales MoM -1.1% vs -1.0% expected
- November retail sales were -0.3%; revised to +0.3%
EUR/USD Live Chart
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