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During early European trading on Friday, EURUSD remained on the defensive around 1.0935. U.S. inflation data came in better than expected on Thursday, providing some support for the dollar and curbing the pair’s gains.
Scorching US consumer price index (CPI) coupled with a stronger-than-expected September jobs report strengthened the chance that any future interest rate cuts by the US Federal Reserve (Fed) should be gradual. The CME FedWatch tool shows that after the release of CPI, investors increased the probability that the Federal Reserve will cut the policy interest rate by 25 basis points (bps) in November to 83.3%.
Market participants will get more clues from the U.S. Producer Price Index (PPI) for September and the preliminary Michigan Consumer Confidence Index for October, which will be released on Friday. Headline producer prices are expected to increase at an annual rate of 1.6% in September, while core producer prices rose at an annual rate of 2.7%. However, if the report shows weaker results, it could weaken the dollar against the euro.
European Central Bank (ECB) policymakers support cutting interest rates amid an economic slowdown, which could put some selling pressure on the Eurozone (EUR). The European Central Bank is expected to cut interest rates twice this year, cutting the deposit rate by 3.5% next week. More than 90% of economists polled by Reuters expected a rate cut next week, with a similar majority betting on a follow-up in December.
Later on Friday, Germany will release HICP inflation data, which is expected to have held steady at an annual rate of 1.8% in September.
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