EUR/USD Suffers On Italy And The Fed, Bears In Control

The EUR/USD is trading closer to 1.1600, extending the losses seen on Thursday. The Italian government approved a deficit of 2.4%, higher than the 2% target and 1.6% that Finance Minister Giovanni Tria wanted. The move triggers a sell-off in Italian bonds and also weighs on the Euro. Tria, a technocrat, stays in his position, for now, to “prevent chaos” as he said.

The EUR/USD is also on the back foot due to USD strength. The greenback enjoyed a confirmation of the robust 4.2% annualized growth rate in Q2. The Durable Goods Orders report was mostly positive with an increase of 4.5% on the headline but less impressive core figures.

Also, markets continue digesting the Fed’s rate decision. The central bank raised rates and signaled four additional ones through 2019. Fed Chair Jerome Powell spoke again on Thursday and said that the economy is strong, employment is high, and inflation is low. At Wednesday’s press conference, Powell was upbeat and clarified that the removal of the words “accommodative policy” does not signal a shift in policy.

The last day of the week, month and quarter may see erratic movements. Money managers may need to adjust their portfolios in the last minute. Also, the economic calendar is packed with events. The flash estimate of euro-zone inflation will likely beat expectations after Germany’s numbers came out above expectations. Earlier in the week, ECB President Mario Draghi said that inflation is on the rise.

The US publishes the Core PCE Price Index later on. The indicator is the Fed’s preferred inflation measure. And it is projected to drop off the 2% level. The publication lags the Core CPI number which was already released. Also, Personal Income, Personal Spending, and the final version of the University of Michigan’s Consumer Sentiment are released.