EUR/USD climbs on Powell’s speech, but look out for key indicators

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Yesterday was a busy day for the EUR/USD, with gains in the morning, in the face of half-hearted European inflation figures, then with a correction in the afternoon, to finally post a strong upward movement overnight, helped by Powell’s speech which confirmed the prospect of a Fed pivot.

Indeed, while the Euro-Dollar tested the psychological threshold of 1.03 to reach a low of 1.0292 in the early afternoon, the currency pair then posted a powerful rebound that continued today, sitting at 1.0455.

Powell’s speech supports EUR/USD

Fed Chairman Jerome Powell said on Wednesday that the pace of rate hikes should slow down from here on out.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in a speech Wednesday. He added that the Fed’s monetary policy was moving closer to the level of restraint that will be sufficient to bring inflation down.

And while the Fed chairman also pushed back on market expectations of a pause in rate hikes, saying that the maximum rate level, or terminal rate, will have to be “a little higher than we thought at the time of the September meeting in the summary of economic projections,” that didn’t stop the dollar from falling back.

Indeed, expectations of a slower Fed rate hike to 50 basis points for the next FOMC meeting on December 14 have strengthened further following Powell’s remarks, with the Fed Rate monitor currently showing a probability of over 80% for this scenario.

Another busy day for the Euro-Dollar on Thursday from a macro perspective

Looking ahead to Thursday, EUR/USD traders will still have several key economic indicators to watch, starting with new European PMI estimates for November in the morning.

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In the U.S., the schedule will be busier, with household income and spending, and especially the PCE price index linked to household spending, deemed to be the Fed’s favorite inflation measure. A little later, investors will also have to watch the November U.S. ISM manufacturing PMI.

Tomorrow, the focus will be on the NFP report on U.S. jobs for the month of November, for which the consensus forecast is for 200k new jobs, after 261k the previous month, for a unemployment rate of 3.7%, stable compared to October.

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