Looking forward to next week, October’s consumer confidence numbers will be significant for the EUR due to private consumption making up over half of the Eurozone economy. A decline could signal a forthcoming Eurozone recession, which would lessen the pressure on the ECB to increase interest rates.
On Tuesday, preliminary private sector PMIs for France, Germany, and the Eurozone will be closely watched, especially in the services sector which comprises over 75% of the economy. A substantial decrease could heighten fears of a recession and lower expectations for ECB rate hikes, with the Eurozone Services PMI predicted to drop marginally from 48.7 to 48.6.
Also on Tuesday, German consumer sentiment numbers will likely be secondary to PMI figures. However, German business sentiment data due on Wednesday will be crucial as an uptick could alleviate fears of a decline in business investment.
The ECB’s monetary policy decision and press conference scheduled for Thursday will shape EUR demand. Economists anticipate unchanged ECB interest rates at 4.5%, with focus shifting to inflation, economic conditions, and interest rate outlooks discussed during the conference.
On Friday, French economy data including Q3 GDP, consumer confidence, and inflation will be scrutinized. An economic contraction and weaker-than-anticipated inflation could burden the EUR/USD.
In the US, October’s preliminary private sector PMIs will be evaluated on Tuesday with emphasis on the Services PMI – over 75% of the economy. Rising hiring and wages could trigger demand-driven inflationary pressures, potentially prompting the Federal Reserve (Fed) to control demand.
Investor appetite for the US dollar will be influenced by Q3 GDP and jobless claims before a busy Friday session. Positive GDP figures, a stable labor market, and a better-than-expected Services PMI may encourage bets on a Fed rate hike.
However, inflation, personal spending, and consumer sentiment figures will impact the EUR/USD on Friday. Persistent inflation, increased spending, and improved consumer sentiment would enhance demand for the US dollar. A more assertive Fed rate path would affect borrowing costs and spending, reducing demand-driven inflationary pressures.
Fed Chair Powell’s speech on Thursday will also affect the EUR/USD due to uncertainties around monetary policy. Additionally, any escalation in the Middle East conflict would boost demand for the US dollar as a safe-haven currency.
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