The EURUSD is currently trading within a narrow range this week. Traders are eagerly awaiting key central bank events scheduled for this week. These events are expected to have a significant impact on rate-cut expectations and the direction of the currency pair.
One of the events that traders are closely monitoring is the testimony of the Federal Reserve Chair. The market is keen to gain insights into the Fed’s stance on interest rates and any potential rate cuts shortly. Additionally, the ECB policy decision will also play a crucial role in shaping market expectations and influencing the pair.
Currently, the EUR is finding support due to reduced expectations of aggressive easing by the ECB. On the other hand, the USD is facing pressure due to the market’s anticipation of rate cuts by the Federal Reserve in June. These contrasting factors are contributing to the consolidation of the currency pair within its current range.
EURUSD is Ahead of Central Bank Events
Apart from central bank events, global risk sentiment and economic data from both the US and Eurozone will also have an impact.
One important economic indicator that traders pay attention to is the US services ISM (Institute for Supply Management) index. This monthly survey provides insights into the non-manufacturing sector, which accounts for a significant portion of the US economy. The index measures changes in business activity, new orders, employment, prices, and other indicators.
In January 2024, the US services ISM index jumped to 53.5 from 50.6 in December, surpassing expectations of 52.1 This reading indicated the strongest growth in the services sector in four months, driven by improvements in new orders. Additionally, price pressures also intensified, reaching the highest level since 2011.
Looking ahead, analysts expect the US services ISM index to remain at 53.0 in February, according to consensus estimates.
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