- The Euro pulls back but remains near two-week highs amid broad-based US Dollar weakness.
- US Treasury Secretary Bessent boosted hopes that the Fed might cut rates by 50 basis points in September.
- EUR/USD remains bullish, but trendline resistance at 1.1735 keeps holding upside attempts.
The EUR/USD has ticked up from session lows at 1.1660, following an array of Eurozone macroeconomic releases, but it remains below the 1.1700 level at the European morning session on Thursday, nursing daily losses after pulling back from two-week highs at 1.1735 highs Wednesday.
In the Eurozone, the second estimation of the Q2 Eurozone GDP has confirmed a 0.1% growth in the quarter and 1.4% from the same period last year, down from 0.6% and 1.5% in the first three months of the year. Employment figures have beaten estimations, but investors’ enthusiasm has been dampened by a sharper-than-expected decline in Industrial Production.
On Wednesday, comments from US Treasury Secretary Scott Bessent on Wednesday hinting at the possibility of a 50 basis points cut next month boosted expectations of Fed easing, buoyed investors’ appetite for risk further, and weighed on the safe-haven Greenback.
The focus today is on the US Producer Price Index (PPI) report, and the weekly Jobless claims will be analysed by markets to look for further clues about the odds for a Fed rate cut in September. In that sense, weak data, especially on inflation, would be welcomed by the market as it would strengthen the case for an easier monetary policy.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | -0.08% | -0.54% | 0.12% | 0.26% | 0.46% | 0.09% | |
| EUR | -0.15% | -0.19% | -0.67% | -0.04% | 0.11% | 0.30% | -0.06% | |
| GBP | 0.08% | 0.19% | -0.50% | 0.26% | 0.36% | 0.60% | 0.23% | |
| JPY | 0.54% | 0.67% | 0.50% | 0.67% | 0.79% | 0.90% | 0.60% | |
| CAD | -0.12% | 0.04% | -0.26% | -0.67% | 0.18% | 0.34% | -0.02% | |
| AUD | -0.26% | -0.11% | -0.36% | -0.79% | -0.18% | 0.23% | -0.24% | |
| NZD | -0.46% | -0.30% | -0.60% | -0.90% | -0.34% | -0.23% | -0.40% | |
| CHF | -0.09% | 0.06% | -0.23% | -0.60% | 0.02% | 0.24% | 0.40% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Hopes of Fed cuts keep the US Dollar depressed
- Euro bulls are hesitating on Thursday, but downside attempts are limited. The US Dollar Index remains pinned near lows as investors ramp up hopes of Fed rate cuts in the second half of the year. The market is awaiting US data, due later on Thursday, to confirm those views.
- On Wednesday, US Treasury Secretary Scott Bessent said in a Bloomberg interview that the Fed is likely to cut interest rates in the coming months, following the moderate inflation figures released earlier this week, in his opinion, “starting with a 50 basis points in September”.
- These comments boosted hopes of Fed cuts further. Bets for an outsized 50 basis points cut in September have increased to 4% from 0% before, according to data from the CME Group’s Fed Watch tool, which shows that the market is fully pricing an easing move immediately after the summer.
- Data released on Thursday confirmed that the Eurozone Economy grew at a 0.1% pace in the second quarter and 1.4% from the same period last year, down from 0.6% and 1.5% in the first three months of the year
- Eurozone Employment increased by 0.1% in Q2, down from the 0.2% growth seen in the first quarter. Year-on-year net employment grew by 0.7%, at the same pace as in the previous quarter, against expectations of a moderate slowdown to 0.6%.
- Eurozone Industrial production, on the other hand, deteriorated beyond expectations with a 1.3% contraction in June, exceeding the market expectations of a 1.% decline, following a 1.1% increase in May. Year-on-year, Industrial Production fell 0.2% after a 3.1% growth in May. The market consensus anticipated a 1.7% increase.
- During the American session, US producer inflation is seen accelerating to 0.2% in July from 0% in June and to 2.5% year-on-year from the previous month’s 2.3% reading. The core PPI is expected to show identical monthly figures and an acceleration to 2.9% in the year from the previous 2.6% reading.
- At the same time, Weekly Jobless claims are expected to have increased by 2,000 to 228,000, providing further reasons for the Fed to cut interest rates at their next meeting.
Technical Analysis: EUR/USD rally stops at the trendline resistance near 1.1735
The EUR/USD‘s immediate bias remains positive, but the bullish momentum eased after failure to breach the descending trendline from July 1 highs. The 4-hour Relative Strength Index (RSI) is still above the 50 line, but an impending cross on the MACD hints at the possibility of a deeper correction.
The pair is clinging now above 1.1665, where it was held on August 12 and 13. Below here, the next support area appears at the August 11 low of 1.1590, ahead of the August 5 low at around 1.1530 and the July 31 high at 1.1460.
To the upside, the mentioned trendline at 1.1735, which capped the pair on July 1, 23, 24, and 28, is likely to pose a serious challenge for Euro bulls. A confirmation above that level would signal the end of the correction from early July highs and shift the focus towards the July 24 highs at 1.1789 and the July 1 highs at 1.1830.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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