The pair is now down 0.4% on the day to 1.1135 after the softer inflation numbers for France and Spain earlier. That is seeing traders step up ECB rate cut odds for October, with the futures market pricing in a ~91% probability for a 25 bps rate cut. Meanwhile, the OIS market is pricing in ~80% odds of a rate cut and that is up from ~60% before the data.
EUR/USD daily chart
Going back to EUR/USD, it has experienced rather back and forth trading so far this week. Price action moved down on Monday and Wednesday but moved up on Tuesday and Thursday. And today, it is looking to settle down as well. On the week, it is now down by just 0.2%.
The key takeaway from the chart is that there was no break above the 1.1200 mark as was the case back in August. That keeps sellers in the picture still as we head into October trading.
Looking to today, there is still potentially one final twist to the equation though. And that will be the US PCE price index later in the day.
The dollar is keeping slightly higher at the balance so far on the day but is yet to overcome the final hurdle this week.
In any case, traders are definitely pricing in considerable odds of an ECB rate cut for October already now. And all else being equal, the balance of risks are quite skewed as we look to the weeks ahead.
If the ECB does deliver on a 25 bps rate cut, market players have pretty much already priced that in. But if the ECB does not, there will be a much needed catch up in euro bids to account for that decision.
Just some food for thought.
But for now, I would repeat again that the key takeaway on the charts this week is that buyers failed at the 1.1200 mark. And that is keeping sellers in the game amid softer data from the euro area as well.