The US Dollar has bounced back from three-year lows following a recent interest rate cut by the Federal Reserve, bolstered by rising US Treasury yields towards the end of the week. In the wake of the Fed’s 25 basis point cut, officials Mary Daly and Neel Kashkari adopted cautious stances while Governor Stephen Miran expressed a preference for deeper easing measures.
Meanwhile, political unrest in France over proposed spending cuts has put additional pressure on the Euro, with EUR/USD trading lower as the Dollar regained strength. The pair was recorded at 1.1747, reflecting a 0.32% decrease, as light economic reports contributed to market movements. The comments from various Fed officials indicated a generally neutral stance by the Federal Open Market Committee, with notable dissent from Governor Miran regarding the potential for further cuts.
In the US, jobless claims have dropped significantly, recording 231K for the week ending September 13—lower than the anticipated 240K and down from an earlier revision of 264K. The Philadelphia Fed Manufacturing Index also showed strong recovery, jumping to 23.2 in September from -0.3 in the previous month, surpassing forecasts and indicating robust sector activity. As futures markets predict a 90% likelihood of another rate cut later this month and approximately 80% chance of an additional cut in December, market sentiment continues to shift.
In France, large-scale protests erupted as citizens rallied in major cities, demanding President Emmanuel Macron and new Prime Minister Sebastien Lecomu abandon plans to implement spending cuts proposed by former Prime Minister François Bayrou. This unrest is exerting downward pressure on the Euro and complicating Macron’s political landscape.
Next week, investors will focus on the US economic calendar which includes S&P Global Flash PMIs, Durable Goods Orders, Jobless Claims, GDP data, and the Core PCE—often viewed as the Fed’s favored inflation gauge. Additionally, multiple Fed officials are expected to make public comments that could further influence market dynamics.
From a technical perspective, the EUR/USD has eased after recent gains, with a notable “evening star” formation indicating a weakening Euro. Despite this retreat, the overall market trend remains supportive, as long as the 1.1700 level holds. A rebound above 1.1800 could lead to further tests of this year’s peak at 1.1918.
In terms of broader economic context, the Euro serves as the currency for 19 EU countries, making it the second most traded currency globally. The European Central Bank (ECB) manages monetary policy in the Eurozone, tasked primarily with ensuring price stability. Economic indicators such as GDP, employment rates, and consumer sentiment have a direct impact on Euro valuation, particularly in the four largest economies—Germany, France, Italy, and Spain—which together comprise 75% of the Eurozone’s economic output.
Ultimately, ongoing economic data releases and geopolitical events will continue to significantly influence both the Euro and the US Dollar in the coming weeks.
