During Monday’s European session, the EUR/GBP pair moves away from its six-month highs and declines, closing at 0.8750. Following the release of the German GDP figures on Monday, the Euro appears to be losing strength. As anticipated, the Producer Price Index (MoM) showed a 0.1% decrease in October. The yearly rate of decline was 11.0% less than the 14.7% contraction that came before it.
Nonetheless, despite early rate cut rumours, the Euro may continue to be supported by the hawkish remarks made by European Central Bank (ECB) officials on Friday. The head of the Bundesbank, Joachim Nagel, issued a warning against starting interest rate reductions too soon. Furthermore, policymaker Robert Holzmann of the European Central Bank contended that a rate drop in the second quarter would be premature.
For the first time since the end of August, the Euro (EUR) continues its upward trend versus the US Dollar (USD) on Monday, propelling EUR/USD to new highs close to 1.0950.
The USD Index (DXY), which measures the performance of the Greenback, is still down and is testing the 200-day SMA, which is significant, in the 103.60 range this morning in Europe.
The ongoing decline in the value of the US dollar coincides with slight fluctuations in US rates across the curve and growing conjecture about probable rate cuts by the Federal Reserve (Fed) in the spring of 2024.
After rising intraday to the $1,985 region on Monday, the price of gold (XAU/USD) meets some supply and falls to the lower end of its daily trading range in the early part of the European session. After Chinese officials promised to implement additional policy support for the nation’s struggling real estate industry, investors were more upbeat. Thus, even though the downside appears mitigated, it is believed to be a major element eroding the precious metal that serves as a safe haven.
Investors currently appear to be confident that the Federal Reserve (Fed) will maintain the status quo at its meeting in December 2023 and has finished its campaign of tightening policy. Furthermore, it is currently priced into the markets that the Fed may start reducing interest rates as early as March 2024.