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EURUSD has retreated


11 May 2023

The most traded currency pair declined on Wednesday. The current EURUSD quote is 1.0970. Tensions on the market have been high in the last week while everyone was awaiting the Fed’s decision on the interest rate, followed by the expectation of the US labour market statistics for April. Market participants are now following the public debt story. The market is getting increasingly emotional.

The employment sector data showed that the economy was doing well. The unemployment rate has fallen, the number of jobs has increased significantly, and average wages have risen. This led investors to doubt whether the Fed would indeed stop raising rates. But those doubts could not last: the public debt issue outweighed them.

The Republicans and Democrats cannot come to any agreement. The former party states that budget expenditure should not be reduced under any circumstances. The latter party is convinced that spending needs to be cut. However, it is the Democrats that are most keen on increasing public debt limits. With the deadline set for 1 June, if the ceiling limit does not move, the government will be left without funds to pay off its own bills. If so, employees of several departments will be sent on unpaid leave. This will deteriorate the government’s image. Negotiations will have to be made to come to an agreement, and debates promise to be hot.

US inflation statistics for April are due to be released today. The CPI is expected to be flat, remaining at 5.0% y/y. Monthly inflation could rise by 0.4% after an increase of 0.1% in March. Basic prices are likely to rise by 0.3% after the earlier 0.4% increase. The market has already gained an overview of the price situation, but details are never superfluous.

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