Last Friday, local time, François Villeroy de Galhau, a member of the Executive Board of the European Central Bank and Governor of the Banque de France, stated that the risk of inflation in the Eurozone being lower than the ECB's target is now as great as the risk of it exceeding the target. Villeroy de Galhau said that this week's actions will not be the last rate cut. He stated, "We are now facing the risk of a persistently low inflation rate, as significant as the risk of inflation exceeding the target. We should continue to appropriately reduce the restrictiveness of monetary policy." Villeroy de Galhau indicated that Eurozone inflation is expected to achieve the ECB's 2% target earlier than anticipated in 2025, while there are no clear signs of economic growth recovery. "The ongoing slowdown in private investment and consumption, especially the recent increase in household savings rates, justifies this interest rate cut," he said. Although the ECB has focused on 25 basis point rate cuts in the last three instances, Villeroy de Galhau stated that more significant rate cuts in the future are possible. He said, "The pace of rate cuts must be flexible and pragmatic, and in a highly uncertain international environment, we reserve full discretion for future interest rate meetings."
Additionally, driven by the sale of computers and other electronic products, UK retail sales unexpectedly increased in September, despite news of potential tax increases in the UK government's budget this month dampening market sentiment. Data shows that UK retail sales grew by 0.3% in September, marking the third consecutive month of growth, while economists had previously expected a 0.4% decline. The better-than-expected retail sales are good news for the Stammer government, which has been dealing with pessimistic market views on the UK's economic and public finance conditions. News of tax increases and spending cuts are considered the reason for the fastest decline in consumer confidence in two and a half years last month. Hannah Finselbach, a senior statistician at the UK Office for National Statistics, said, "Retail sales increased in September due to a significant rise in sales at technology product stores. However, this was partially offset by the poor performance of supermarkets, with supermarket retailers stating that bad weather and households continuing to cut back on luxury food purchases affected sales."
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Today's data to watch includes Germany's September PPI year-on-year rate and the US September Conference Board Leading Economic Index month-on-month rate.
US Dollar Index
Last Friday, the US Dollar Index fluctuated downward, closing slightly lower on the day, currently trading around 103.50. In addition to profit-taking exerting some pressure on the exchange rate, expectations of further rate cuts by the Federal Reserve this year also put pressure on the exchange rate. Moreover, the weak economic data released by the United States during the session also exerted some pressure on the exchange rate. Today, focus on the resistance around 104.00, with support around 103.00.
Euro/USD
Last Friday, the Euro fluctuated upward, closing slightly higher on the day, currently trading around 1.0870. In addition to short covering providing some support for the exchange rate, the US Dollar Index softened due to profit-taking, expectations of further rate cuts by the Federal Reserve this year, and weak economic data, which was also an important factor supporting the Euro's rebound. However, expectations of another rate cut by the European Central Bank in December limited the exchange rate's rebound space. Today, focus on the resistance around 1.0950, with support around 1.0800.
GBP/USD
Last Friday, the British Pound fluctuated upward, closing slightly higher on the day, currently trading around 1.3050. In addition to short covering and technical buying around 1.3000 providing some support for the exchange rate, the US Dollar Index fell due to multiple bearish factors, also providing some support for the Pound. Moreover, the good economic data released by the UK during the session also provided some support for the exchange rate. Today, focus on the resistance around 1.3150, with support around 1.2950.
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