EUR/USD HOLDS ONTO GAINS AFTER ROBUST EUROZONE GDP GROWTH SUPPORTS EURO

• EUR/USD clings to gains near 1.0850 on upbeat Eurozone GDP growth and hot German inflation.
• ECB Lagarde sees more interest-rate cuts and said she is hopeful about inflation returning to the bank’s target of 2%.
• The US Dollar will be influenced by the US presidential election, NFP, and the ISM Manufacturing PMI data.

EUR/USD holds up near 1.0850 in Thursday’s European session following Wednesday’s sharp recovery. The major currency pair strengthened as traders have pared back bets of a large interest-rate cut from the European Central Bank (ECB) in the December monetary policy meeting after a faster-than-expected Eurozone <wbr>Gross Domestic Product (GDP) growth and hotter-than-forecasted German inflation.

Eurostat reported on Wednesday that the Eurozone expanded at a faster pace of 0.9% in the third quarter of the year compared with the same period a year earlier. A major contribution to higher growth in the Eurozone came from its largest nation, Germany, which managed to dodge a technical recession. The German economy surprisingly rose by 0.2% compared with the previous quarter, beating expectations of a 0.1% contraction. Meanwhile, the growth rate in Spain was higher than expected, as forecasted in France, and slower than anticipated in Italy.

The German flash Harmonized Index of Consumer Prices (HICP) for October accelerated at a faster pace of 2.4% on year, higher than estimates of 2.1% and the prior release of 1.8%, suggesting that the battle against inflation is yet not over. 

Meanwhile, ECB President Christine Lagarde has shown confidence about taming price pressures in an interview with the French newspaper Le Monde published on Thursday. “The objective is in sight, but I am not going to tell you that inflation is under control,” Lagarde said. She reaffirmed her commitment to interest rate reduction, but refrained from committing to a specific rate cut path.