EUR/USD maintains gains after strong eurozone GDP growth supports euro

• EUR/USD has maintained its strength around 1.0850 due to strong GDP growth in the euro area and hot inflation in Germany.
• ECB President Lagarde expects further interest rate cuts and expressed hope that inflation will return to the central bank's 2% target.
• The USD will be influenced by the US presidential election, NFP and ISM Manufacturing PMI data.

Following Wednesday's sharp recovery, EUR/USD remains hovering around 1.0850 in European trading on Thursday. Traders at December's monetary policy meeting said the European Central Bank (European Central Bank) Major currency pairs rose as investors refrained from betting on a significant rate cut by the ECB. Inflation exceeds Germany's expectations.

Eurostat reported on Wednesday that the eurozone expanded 0.9% faster in the third quarter of this year compared to the same period last year. A major contribution to the high growth of the euro area was made by the largest country, Germany, which managed to avoid a technological recession. Germany's economy surprisingly rose by 0.2% quarter-on-quarter, beating expectations for a 0.1% contraction. Meanwhile, Spain's growth rate was higher than expected in France, and Italy's growth rate was slower than expected.

The preliminary German Harmonized Index of Consumer Prices (HICP) accelerated in October to 2.4% year-on-year, faster than the expected 2.1% and the previously announced 1.8%, suggesting the fight against inflation is not over yet. did.

Analysts at ING said, “The just-released preliminary figures for Germany's inflation rate for October have encouraged some ECB members to be more open to this rate cut and the European Central Bank's renewed aggressive rate cuts. You may regret it.”

For further clues on the current state of inflation, investors will keep an eye on October's preliminary Eurozone HICP data, which will be released at 10pm Japan time.

Meanwhile, ECB President Christine Lagarde expressed confidence in containing price pressures in an interview with French newspaper Le Monde published on Thursday. “We're on target, but I'm not going to say that inflation is under control,” Lagarde said. He reaffirmed his commitment to lower interest rates, but declined to commit to a specific rate cut path.

Daily Digest Market Trends: USD Faces Pressure, EUR/USD Holds Up

• The EUR/USD pair remains elevated around 1.0850 due to positive Eurozone GDP statistics. Although higher GDP growth in the euro area has made the euro more attractive, its prospects remain at risk amid uncertainty ahead of the US presidential election.
• Traders appear to be pricing in former President Donald Trump's victory over current Vice President Kamala Harris, who will raise tariffs on all imports by 10%, hurting the euro zone's strong exports. This scenario is expected to have a significant impact on the euro area economy. sector. President Trump said this week that if he wins the Nov. 5 election, the European Union “will have to pay a heavy price” for not buying enough U.S. exports, according to Reuters.
• Meanwhile, the U.S. dollar (USD) has weakened and investors are focused on October U.S. Nonfarm Payrolls (NFP) and ISM Manufacturing PMI data due on Friday. Economic data will influence market speculation about the Federal Reserve's rate cut path. Personal consumption expenditure (PCE) price index data for September is also expected to be released later on Thursday, but Wednesday's US GDP report has already released the overall numbers for the third quarter, so there will be some market volatility. The impact is expected to be limited.
• Job market conditions appear to be improving, according to ADP's private employment index released on Wednesday. The report showed solid labor demand, with 233,000 new jobs added in October compared to 159,000 in September.

Technical analysis: EUR/USD aims to expand above 1.0850

The euro/dollar pair was close to a nearly one-week high of 1.0850 during European trading. The major currency pair sustained its recent recovery after breaking through the round level resistance at 1.0800. However, the broader outlook remains bearish as it remains below the 200-day exponential moving average (EMA) around 1.0900.

After hovering in the 20.00-40.00 range for almost a month, the 14-day Relative Strength Index (RSI) rose to near 42.00, suggesting the bearish momentum is over.

On the upside, the common currency pair could rise to near the 200-day EMA at around 1.0900 and the September 11 low at around 1.1000. On the downside, the upward trend line around 1.0750, drawn from the April 16 low around 1.0600, will be an important support area for euro bulls.