- The Euro rallies further amid generalised US Dollar weakness following moderate inflation data in the US.
- July’s US Consumer Price Index data has boosted hopes of Fed interest-rate cuts in September.
- EUR/USD remains bullish, approaching a key trendline resistance at 1.1735.
The EUR/USD extends gains to fresh two-week highs and is trading near 1.1730 on Wednesday’s European morning session after jumping from 1.1600 in the previous day. The moderate US Consumer Price index (CPI) figures seen on Tuesday have cemented hopes of a Federal Reserve (Fed) interest-rate cut in September, sending US yields and the US Dollar (USD) lower and providing additional support for the Euro (EUR).
Consumer inflation remained steady in July, according to the CPI report released on Tuesday, showing little evidence of the impact of Trump’s tariffs. This, in the context of a softening labor market, provides a significant endorsement for the Fed to ease its monetary policy next month.
Meanwhile, investors remain wary that Trump will move to replace the vacancies of the central bank with loyalists who would pursue his aim of a more accommodative monetary policy. This is fuelling hopes of a more dovish monetary policy stance whilst undermining the independence of the world’s major central bank. These Fed-related woes add further negative pressure on the US Dollar.
Hopes of immediate interest rate cuts have boosted risk appetite, which, in the absence of key macroeconomic releases, will drive currency markets on Wednesday. In the US, the comments from Fed officials Thomas Barkin, Austan Goolsbee, and Bostic will be watched for confirmation of a September cut. All in all, the risk for the USD has turned to the downside.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.37% | -0.41% | -0.29% | -0.08% | -0.38% | -0.55% | -0.51% | |
| EUR | 0.37% | 0.00% | 0.03% | 0.27% | -0.01% | -0.20% | -0.15% | |
| GBP | 0.41% | -0.01% | 0.08% | 0.26% | -0.02% | -0.12% | -0.13% | |
| JPY | 0.29% | -0.03% | -0.08% | 0.20% | -0.10% | -0.26% | -0.23% | |
| CAD | 0.08% | -0.27% | -0.26% | -0.20% | -0.32% | -0.43% | -0.39% | |
| AUD | 0.38% | 0.00% | 0.02% | 0.10% | 0.32% | -0.19% | -0.13% | |
| NZD | 0.55% | 0.20% | 0.12% | 0.26% | 0.43% | 0.19% | 0.08% | |
| CHF | 0.51% | 0.15% | 0.13% | 0.23% | 0.39% | 0.13% | -0.08% |
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: Risk appetite is likely to weigh on the USD
- US CPI data revealed that the impact of tariffs on the US economy has been limited so far, which allows the Fed to ease its monetary policy to support economic growth and employment. The market celebrated the news, with risk appetite sending the safe-haven US Dollar lower across the board.
- US consumer inflation remained steady at a 2.7% year-on-year pace in July, instead of increasing to 2.8% as the market consensus had anticipated. Core inflation rose to 3.1% from 2.9% in June, but these figures did not dent hopes that the Fed has a clear path to ease its monetary policy.
- Later on Tuesday, Fed officials Thomas Barkin and Jeffrey Schmid featured the divergence within the bank’s Board. The former played down inflation fears while the latter defended the need to keep rates on hold as price pressures remain too high.
- The odds for a 25 basis points cut next month have risen to 95% from 85% before the US CPI release, according to data from the CME Group’s FedWatch Tool, with at least another rate cut priced in for October or December.
- In Europe, the final German Harmonized Index of Consumer Prices (HICP) release verified that prices grew at a 0.4% pace in July compared with the previous month and by 1.8% compared with the same month last year. The impact on the Euro has been minimal.
Technical Analysis: EUR/USD approaches trendline resistance at 1.1735
The EUR/USD’s immediate bias remains bullish. The 4-hour RSI has bounced up from the 50 line that divides the positive from the negative territory, and the MACD has crossed above the signal line, a positive sign. The risk environment is Euro-supportive, but price action has reached a key area where bulls might find significant resistance.
The pair has pierced the 78.6% Fibonacci retracement of the late-July sell-off, at 1.1700, and is now heading to retest the descending trendline, at 1.1735, which capped bulls on July 1, 24, and 27. A confirmation above that level would confirm that the correction from the July 1 high has completed, shifting the focus towards the July 24 highs at 1.1789.
A rejection at current levels, on the other hand, might find support at the August 11 low of 1.1590. Further down, the next targets would be the August 5 low at around 1.1530 and the July 31 high at 1.1460.
