- EUR/USD falls below 1.0700 as the Fed maintains a hawkish stance on interest rates.
- Fed Governor Michelle Bowman sees no rate cuts this year.
- Investors will focus on US core PCE and preliminary inflation data from major Eurozone economies this week.
EUR/USD falls below the round support level of 1.0700 in the American session on Wednesday. The EUR/USD pair remains on the defensive as the Euro’s near-term outlook weakens amid uncertainty over European Union (EU) legislative elections and growing speculation that the European Central Bank (ECB) could make subsequent rate cuts.
Fears over elections in the Eurozone intensified after French President Emmanuel Macron called for early elections when his party suffered a defeat in preliminary results for Marine Le Pen’s far-right party, the National Regroupment (RN). The Euro could face more pressure if the shared continent sees a major shift in politics.
Meanwhile, expectations of the ECB to make consecutive rate cuts improve as Germany’s economic outlook appears to worsen due to weak demand prospects. Data on Monday showed that the German IFO Expectations Index unexpectedly fell to 89.0 from estimates of 91.0 and the previous release of 90.3 (revised down from 90.4). Commenting on the data release, IFO president Clemens Fuest said: “The German economy is struggling to overcome stagnation.”
This week, investors will focus on preliminary June inflation data for Spain, France and Italy, due to be released on Friday.
Market Drivers and Daily Movements: EUR/USD Falls as US Dollar Soars
- EUR/USD is under downward pressure as the US Dollar (USD) advances due to hawkish interest rate guidance from Federal Reserve (Fed) policymakers, who continue to argue in favor of maintaining the current interest rate framework as they want to see inflation decline for months before considering rate cuts. The US Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, jumps to a crucial resistance of 106.00. United States (US) inflation declined more than expected in May, however, officials expect that a one-time decline in price pressures will be insufficient to make rate cuts appropriate.
- On Tuesday, Fed Governor Michelle Bowman delivered hawkish guidance on interest rates. Bowman said they are not at a point where rate cuts are appropriate. She pushed back expectations of rate cuts until 2025 and warned of further hikes if disinflation appears to stall or reverse.
- Contrary to the Fed’s hawkish outlook on interest rates, investors expect two rate cuts this year, with the policy easing process beginning at the September meeting. For more clues on the outlook for interest rates, investors await core personal consumption expenditure (PCE) price index data for May, due out on Friday.
- According to estimates, the PCE inflation report will show that price pressures grew at a slower pace of 0.1% month-on-month from the previous release of 0.2%. On an annual basis, core inflation is expected to rise modestly by 2.6% from 2.8% in April. Soft inflation data would raise expectations that the Fed will cut interest rates in September, while higher-than-expected numbers would weaken them.
Euro price today:
Euro PRICE Today
The table below shows the percentage change of the Euro (EUR) against the main currencies today. Euro was the strongest currency against the New Zealand Dollar.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | -0.41% | -0.01% | 0.05% | -0.15% | -0.36% | 0.30% | -0.16% | |
| USD | 0.41% | 0.40% | 0.48% | 0.28% | 0.03% | 0.69% | 0.26% | |
| GBP | 0.00% | -0.40% | 0.08% | -0.14% | -0.36% | 0.32% | -0.14% | |
| JPY | -0.05% | -0.48% | -0.08% | -0.23% | -0.47% | 0.21% | -0.24% | |
| CAD | 0.15% | -0.28% | 0.14% | 0.23% | -0.28% | 0.43% | -0.03% | |
| AUD | 0.36% | -0.03% | 0.36% | 0.47% | 0.28% | 0.66% | 0.22% | |
| NZD | -0.30% | -0.69% | -0.32% | -0.21% | -0.43% | -0.66% | -0.44% | |
| CHF | 0.16% | -0.26% | 0.14% | 0.24% | 0.03% | -0.22% | 0.44% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent EUR (base)/USD (quote).
Technical Analysis: EUR/USD settles below 1.0700
EUR/USD falls slightly below the crucial support of 1.0700. The EUR/USD pair faces selling pressure near the descending edge of a symmetrical triangle on the daily chart near 1.0750, which is plotted from the December 28, 2023 high around 1.1140. The pair is trading below the 50-day EMA, indicating that the short-term outlook is bearish.
The 14-period RSI is near 40.00. A bearish momentum would be triggered if the oscillator falls below this level.
Interest rates FAQs
Financial institutions charge interest rates on loans from borrowers and pay them as interest to savers and depositors. They are influenced by basic interest rates, which are set by central banks based on the evolution of the economy. Typically, central banks are mandated to ensure price stability, which in most cases means targeting an underlying inflation rate of around 2%.
If inflation falls below the target, the central bank can cut base interest rates, in order to stimulate credit and boost the economy. If inflation rises substantially above 2%, the central bank typically raises core lending rates to try to reduce inflation.
In general, higher interest rates help strengthen a country’s currency by making it a more attractive place for global investors to park their money.
Higher interest rates influence the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or depositing cash in the bank.
If interest rates are high, the price of the US Dollar (USD) usually rises and, since Gold is priced in dollars, the price of Gold falls.
The federal funds rate is the overnight rate at which U.S. banks lend to each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set in a range, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the figure quoted.
Market expectations about the Federal Reserve funds rate are tracked by the CME’s FedWatch tool, which determines the behavior of many financial markets in anticipation of future Federal Reserve monetary policy decisions.
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.
