European and US stock futures are trading near their high of the day as traders and investors are very much focused on the Eurozone's inflation data, which is going to drive the stock market rally or it could also break the stock market rally as well. Everything hinges on the number and what the European Central Bank will do on the back of that print. Now that the inflation numbers are out, the question is, Where do we go from here?
Eurozone's Inflation Number
Today at 10:00 AM UK time, we saw the Eurozone's fresh reading. The expectations were that the inflation number would print a reading of 2.2% while the previous number was at 2.6%. The bar was set very high in terms of beating the expectations. The actual number came in at 2.2%. Now that the actual number has very much matched expectations, the pressure is on the European Central Bank once again to do what it takes to lower the interest rate as their target inflation number is only 2%. The inflation number before COVID in the Eurozone was at 1.9%, and looking at today's number and the previous trend, it is safe to say that we are not that far out in terms of achieving the target that the ECB has put in place.
What About the Other Side of the Coin?
In the last few weeks, we had the FOMC minutes and Fed Chairmain giving his comments on the US economy and the current state of the monetary policy. It is clear that the Fed will move the interest rates in their September meeting, and this time the move is going to be in the downward direction. This means that for the first time since COVID, the Fed will be lowering the interest rate, but what is still very uncertain is how much the Fed will lower the interest rates. Currently, the understanding is that the Fed will lower the rates by 25 basis points. But everything hinges on the US NFP data, which will come out next week.
Economic Docket
Going into today’s market, there is plenty of firework that traders will experience. Firstly, we have the Canadian GDP number, GDP m/m, and the forecast for this is for 0.1% while the previous number was at -1.2%. After that, we have the US Core PCE Price Index m/m, and the forecast for that number is to come in at 0.2%, while the previous number was also at 0.2%. Following these readings, we have the US Chicago PMI and revised UoM Consumer Sentiment and revised UoM inflation expectations numbers.
Technical’s Matters
When it comes to the EUR/USD chart, what matters the most is the denominator here as we dont know still how much more interest rates are going to come. Speaking from a technical price analysis perspective, the price is very much in battle with the 50-day SMA on the 30-minute time framw and as long as the price continues to trade below this moving average, we are more than likely to see more selling pressure. The EUR/USD forex trading chart is shown below
Chart by AvaTrade
On the date of publication, Naeem Aslam did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.