EUR/USD on Thursday stabilised at 1.1792 after a sharp decline the day before. The US dollar was supported by strong US macro data and unexpectedly tough signals from the Fed.
The minutes of the previous meeting showed that disagreements remain within the Federal Reserve regarding the future path of rates. This suggests that it may not be easy for the new chair to implement a rate cut. Some members had previously explicitly admitted the possibility of a rate hike if inflation remains above target.
The market has slightly reduced expectations for policy easing this year, but still prices in two 25-basis-point cuts before the end of the year.
Additional support for the dollar was provided by industrial production data. It grew at the highest rate in almost a year. Orders for core capital goods exceeded forecasts, and the number of new home mortgages reached a five-month high.
PMI indices…
