- EUR/USD rises 0.36%, ready to finish the flat week after Trump’s delay in military action against Iran.
- Waller’s call for a cut in July contrasts with the Fed report and Barkin’s cautious posture.
- The commercial agreement between the EU and the US is in danger as the deadline of July 9 is approaching, limiting the bullish potential.
The euro recovers some land against the US dollar on Friday and is ready to end the practically flat week as the appetite for the risk deteriorates. This happens despite the fact that US President Donald Trump delayed military intervention in the Israel-Iran conflict. At the time of writing, the EUR/USD is quoted at 1,1534, rising 0.36%.
The market appetite has become negative due to US business policies that restrict chips manufacturers with production interests in China, since a senior US official seeks The shared currency. However, Iran said he would not negotiate while Israel continued with hostilities.
Another event that promoted the euro was the announcement of the governor of the Federal Reserve (Fed), Christopher Waller, who declared that he supports a rate cut in July. On the contrary, the FED monetary policy report suggested that current policy is well positioned in the middle of the uncertainty of external shocks, while Richmond’s president Thomas Barkin, favored greater patience before reducing rates.
Despite this, the EUR/USD could be under pressure due to the lack of a commercial agreement between the European Union (EU) and the United States. The possibilities of an agreement are decreasing as the deadline of July 9 is approaching.
In the Data Front, the EU revealed that the EU consumer confidence index disappointed investors, although the operators ignored the bad reading and led to the EUR/USD upwards.
Daily summary of the market movements: EUR/USD ignores the Hawkish position of the Fed and recovers
- Geopolitics will continue to drive the price action, which until now has benefited the appreciation of the US dollar. Therefore, an environment of risk aversion is very likely to push the EUR/USD down, although the trade of “selling America” ​​remains intact.
- New data from the United States pointed out an economy in cooling, with the manufacturing index of the Fed of Philadelphia keeping in -4 in June, without changes compared to May, but below the expectations of a milder contraction of -1.
- The president of the Fed, Jerome Powell, said that the bank is in waiting mode, adding that the policy is modestly restrictive. He added that as long as the labor market remains solid and inflation cools, keeping the rates is “the right thing.”
- During the week, the Fed kept the rates without changes in 4.25%-4.50%. Fed officials updated their economic projections, degrading the GDP growth perspective by 2025 to 1.4% from 1.7% in March. The unemployment rate forecast was checked to 4.5% from 4.4%, while the inflation projection of the underlying PCE increased to 3.1% from 2.8%.
- The EU consumer confidence in June fell to -15.3, worse than the expected improvement of -14.5.
- Financial market participants do not expect the ECB to reduce their deposit rate at 25 basic points (PBS) at the July monetary policy meeting.
EURO TECHNICAL PERSPECTIVE: EUR/USD rises above 1,1500, the bulls point to 1,1550
From a technical point of view, the EUR/USD upward trend is resuming. The price action suggests that a “morning star” graphic pattern of three candles implies that buyers are accumulating, ready to boost the upward change rate. A greater confirmation is provided by the relative force index (RSI), which is pointing up after having stagnated for two days.
Therefore, the first resistance of the EUR/USD would be 1,1550. A rupture of this level will exhibit 1,1600, followed by the maximum of the year to the date of 1,1631. On the contrary, a daily closure below 1,1500 would open the way to try 1,1450. The next key support would be the simple mobile average (SMA) of 20 days in 1,1438, followed by 1,1400.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
