- Fed’s waler supported the cut in July rate, the treasury yield and dollar drawing less.
- The UOM survey features better emotion and reduced expectations of inflation in the US.
- ECB decision, EU PMIS, and US macro data focus for the coming weeks.
EUYR/USD ended Friday’s session with a profit of more than 0.26%, which was a weak US dollar, after the doviz comments by Fed Governor Christopher Waller, weighed on American Treasury Yield. Nevertheless, improvement in consumer sentiment reduced the profit of euro, with pair trade at 1.1626 at the time of writing.
Wall Street finished the session on a high note, as investors happy the comments by Wallar, which in July advocates a rate cut. Despite this, the recent comments by Chicago Fed, president of Chicago Fed, revealed that they have operated their Dawish stance, stating that he is careful due to the latest CPI report, which reflects the first signs of tariffs that increase the goods inflation.
In the data front, the University of Michigan (UOM) in July showed that their financial conditions in homes became optimistic and also expected inflation to decrease. In addition, signs of improvement in housing data were also shown, as European economic doors were rare, investors indicated a trade agreement between the European Union (EU) and the United States (US).
Next week, the Economic Dock of the European Union will have consumer confidence, flash PMI and European Central Bank (ECB) monetary policy decision for July. Across the pond, the US schedule will announce US housing data, S&P Global Flash PMIS, initial unemployed claims and durable goods orders.
Daily Digest Market Movers: EUR/USD Receives 1.1600 despite strong American data
- Michigan University’s initial consumer spirit index increased to 61.8 in July, slightly above 60.7 in June and 61.5 above. The survey director Joan Hasu said, “Consumers are unlikely to gain their confidence in the economy until they are assured that inflation is unlikely to deteriorate, for example, if the business policy stabilizes the future.”
- The survey of the University of Michigan also saw a decline in inflation expectations. Long-term inflation (5-year outlook) was revised from 4% to 3.6%, while one year expectations fell from the last 5% to 4.4%.
- Separately, Fed Governor Christopher Waller admitted that while the labor market remains constant, conditions in the private sector are less stronger. Although he expressed support for a possible rate cut in July, he emphasized that he would not do before the meeting, saying that he prefers “listening to all sides” before making a final decision.
- Chicago’s Fed Austall Gulasbi said that the new round of tariffs does not help fight inflation, so they can understand the impact on (Fed) prices. Although he is in favor of rate cuts, he said that if the value raises pressure, they will have to wait for a long time to accommodate the policy.
- Recent American economic figures painted a mixed picture of inflation. While the Consumer Price Index (CPI) reached close to 3% points, the manufacturer price index (PPI) showed signs of ease. However, a strong-and-and-appreated retail sales suggested that there was a much higher increase in the high prices associated with the new tariffs instead of the underlying demand.
- Since last week, many ECB policy makers have expressed their views on the monetary policy approach. Mario Centeno joined D. Guindos, Wujik and Villaroy in the signal support for a stagnation or potential rate cut. Fabio Paneta also supported ease, citing rising risks for growth easily.
- In contrast, Isabel Snabel argued that the current rates have been appropriately deployed, an opinion echoed by Robert Holzman has advocated, which emphasized the need to wait for more data before making any adjustments.
EUR/USD Technical approach: Consolation within 20 and 50-day SMA above 1.1600
EUR/USD is trading sideways sideways, despite being biased upwards from a market structure point of view. However, the relative power index (RSI) indicates the recession, suggests that neither buyers nor sellers are under control.
Therefore, if Eur/USD climbs ahead of 1.1650, it cleans the path to test the 20-day simple moving average (SMA) at 1.1692. Once cleaned, the following targets are 1.1700 and 1.1800.
On the other hand, if EUR/USD falls below 1.1600, the next support level will be 1.1550 points, followed by 50-day SMA at 1.1497. Once those demand areas are crossed, the following row of defense for the bull will be 100-day SMA on 1.1266.
Euro sub -procurement
Euro 19 is the currency for the countries of the European Union that belong to Eurozone. This is the second most trading currency in the world behind the US dollar. In 2022, it was responsible for 31% of all forex transactions, with the average daily turnover $ 2.2 trillion more than a day. EUR/USD is the world’s heaviest business currency pair, which is accounting for all transactions estimated from all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
Frankfurt is the Reserve Bank for European Central Bank (ECB), Eurozone in Germany. The ECB determines interest rates and manages monetary policy. The primary mandate of ECB is to maintain value stability, which means to either control inflation or stimulate growth. Its primary tool is to increase or reduce interest rates. Relatively high interest rates – or compared to high rates – usually will benefit the euro and vice versa. The ECB Governing Council takes the monetary policy decision in the meetings held eight times a year. Decisions are made by Eurozone national banks and heads of six permanent members, including ECB President, Christine Lagard.
Eurozone inflation data, measured by the harmonious index of consumer value (HICP), is an important economical for the euro. If inflation increases more than expected, especially if above 2% target of ECB, it binds the ECB to raise interest rates to bring it under control. Relatively high interest rates will usually benefit the euro than its counterparts, as it makes the region more attractive as a place to park its money for global investors.
The data releases the health of the economy and can affect the euro. Indicators like GDP, manufacturing and services PMI, employment and consumer spirit survey can all affect the direction of single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, but it can also encourage ECB to keep interest rates, which will directly strengthen the euro. Otherwise, if the economic data is weak, the euro is likely to fall. Economic data is particularly important for the four largest economies in the Euro region (Germany, France, Italy and Spain), as they are 75% of the Eurozone economy.
Another important data release for the euro is the business balance. Measure the difference between what this indicator earns from its exports and what spends on imports over a certain period. If a country makes excessive demand after exports, its currency will receive purely value from the additional demand made from foreign buyers to buy these goods. Therefore, a positive pure business balance strengthens a posture and contrast to a negative balance.
