EUR/USD remains weak with investors awaiting German CPI and US PCE Inflation numbers
- The Euro attempts to regain some ground after a 2.5% decline so far this week.
- Strong US GDP data and a hawkish Fed boosted the US Dollar across the board on Wednesday.
- The US PCE Price Index due later is expected to show that inflation remains sticky, above the 2.0% target.
The EUR/USD pair is posting marginal gains on Thursday, following a sharp sell-off over the last three days. The pair extended its decline on Wednesday following a hawkish message from the Federal Reserve (Fed), and remains on the defensive with investors awaiting the release of Germany’s preliminary Consumer Prices Index, and US Personal Consumption Expenditures (PCE) data.
The Euro (EUR) is trading at 1.1445 at the European market opening, up from the seven-week lows at 1.1400 hit after the Fed’s monetary policy decision on Wednesday, yet limited below 1.1460 and on track for a 3% depreciation in July.
The US is emerging as the best performer in an eventful week. US data continues to show that the economy remains resilient, and the Federal Reserve maintains its cautious stance towards interest rate cuts. At the same time, the deals with key US trading partners have eased some of the trade uncertainty, which hurt the US Dollar earlier in the year.
On Wednesday, preliminary data released by the US Commerce Department revealed that the economy grew beyond expectations in the second quarter, providing further reasons for the Fed to wait longer for a better assessment of the economic impact of tariffs.
The Fed confirmed the expectations and maintained its benchmark interest rate unchanged, shrugging off US President Donald Trump’s calls for an easier policy, and gave little indication of the timing for the next rate cut. Investors pared back their bets on Fed easing for this year, and the US Dollar rallied further across the board.
The focus this Thursday will be on the US PCE Price Index report, the Fed’s inflation gauge of choice that might provide some further insight about the central bank’s monetary policy, ahead of Friday’s all-important Nonfarm Payrolls report.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | 0.18% | 0.33% | 0.16% | -0.05% | -0.08% | -0.10% | |
| EUR | 0.19% | 0.35% | 0.51% | 0.35% | 0.10% | 0.12% | 0.10% | |
| GBP | -0.18% | -0.35% | 0.18% | -0.00% | -0.26% | -0.24% | -0.25% | |
| JPY | -0.33% | -0.51% | -0.18% | -0.16% | -0.38% | -0.34% | -0.38% | |
| CAD | -0.16% | -0.35% | 0.00% | 0.16% | -0.15% | -0.24% | -0.25% | |
| AUD | 0.05% | -0.10% | 0.26% | 0.38% | 0.15% | 0.02% | 0.01% | |
| NZD | 0.08% | -0.12% | 0.24% | 0.34% | 0.24% | -0.02% | -0.01% | |
| CHF | 0.10% | -0.10% | 0.25% | 0.38% | 0.25% | -0.01% | 0.00% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily digest market movers: Strong US data and a hawkish Powell underpin demand for the USD
- The Fed kept its benchmark interest rate unchanged at the 4.25%-4.50% range and dampened hopes of further monetary easing as, according to Chairman Jerome Powell, “we have a long way to go to really understand” the impact of Trump’s tariffs in the US economy and inflation.
- Macroeconomic data keep providing further reasons for the Fed to be patient. US preliminary GDP expanded at a 3% rate in the second quarter, from a 0.5% contraction in the previous quarter, well beyond the 2.4% growth foreseen by market analysts.
- Also on Wednesday, the US ADP Employment Change report showed a 104,000 increase in private payrolls in June, beating expectations of a 78,000 reading and reversing the 23,000 decline in the previous month.
- In light of these figures, traders scaled back expectations of Fed interest rate cuts for this year. Odds for a cut in September dropped to 43% from 63% before the decision, and the market is now pricing a 35 basis points (bps) cut for the rest of the year, down from nearly 50 earlier this week.
- On the trade front, US representatives announced a new deal with South Korea, in the same line as the ones with Japan and the EU. The lower trade uncertainty stemming from these agreements, plus the feeling that they are more favourable for the US than for its partners, is providing additional support for the US Dollar ahead of the August 1 deadline for Trump’s tariffs.
- In Europe, labour market data from June showed that unemployment remained steady at record lows with the jobless rate at 6.2%, following a downwardly revised 6.2% in May, which was previously estimated at 6.3%.
- Later on the day, the preliminary German CPI is expected to show that year-on-year inflation continues moderating, to 1.9% July from 2.0% in June. The Harmonized CPI’s monthly rate, however, is expected to have accelerated to 0.4% from 0.1% in June.
- In Italy, preliminary Consumer Prices Index data revealed that inflation eased less than expected in July. The Yearly CPI declined to 1.7% from June’s 1.8% rate, short of the market forecasts of a 1.6% reading. Month-on-month price pressures contracted at a 1% pace, as expected, from a 0.2% advance in June. The impact of these data in the Euro was minimal.
EUR/USD attempts to correct higher after a sharp sell-off
EUR/USD extended its decline on Wednesday, breaking below previous troughs at 1.1560 and 1.1450 to reach its lowest levels since mid-June. The pair is going through a corrective reaction on Thursday as the Relative Strength Index (RSI) reached oversold levels in most timeframes, but the broader trend is likely to remain bearish.
The Euro is attempting to regain the mentioned 1.1450 level (around June 18, 19, and 23 lows) at the moment of writing. Correlation studies suggest that the pair might crawl higher later in the day, as the US Dollar Index is pulling back, but the 1.1500 psychological level and 1.1560-1.1570 area (Wednesday’s high and July 16 lows) are likely to pose significant resistance.
On the downside, below Wednesday’s low at 1.1400, the targets are 1.1370, June 6 and 10 lows, and the May 30 low, at 1.1312.
