- EUR/USD wins 0.39%, quoting near the annual maximum after the high fire weakens the demand of the secure shelter.
- Powell says that politics is moderately restrictive but open to cuts if inflation remains contained.
- The IFO business climate improves for sixth month; ECB officials hint a stable path unless inflation shoots.
EUR/USD extended its profits for the fourth consecutive day, rising 0.39%, although it lies below the annual maximums of 1,1641, driven by the weakness of the US dollar caused by a unwinding of the conflict in the Middle East. Israel and Iran agreed to stop the fire, which improved the mood of the market and, ultimately, weighed on the dollar. At the time of writing, the par quoted at 1,1619, rising 0.38%.
The mood on the market became optimistic, pushing the dollar down. The US dollar index (DXY), which follows the dollar’s performance against a basket of six currencies, including the euro, fell more than 0.47%, quoting near the weekly minimums of 97.70.
Recently, the New York Times revealed that American intelligence suggests that attacks on Iran did not destroy nuclear sites, which CNN had previously reported. Despite this, Wall Street is prepared to close Tuesday’s session in Green, with operators ignoring the hard line comments of the Federal Reserve, Jerome Powell.
In his testimony before the US House of Representatives, Powell declared that rates are moderately restrictive. He added that if the inflationary pressures are contained, the Federal Open Market Committee (FOMC) could consider cutting fees.
During the European session, the Eastern Eastern Agenda revealed that the IFO business climate increased for the sixth consecutive month, despite the general geopolitical uncertainty. Apart from this, some speakers from the European Central Bank (ECB) crossed the lines.
Francois Villeroy of the ECB said that the Central Bank could still cut rates if inflation expectations remain moderate, according to the FT. Kazimir of the ECB changed its posture, becoming neutral, favoring keeping the rates without changes. He said he thinks “that we are in the objective in regards to the neutral rate.”
Daily summary of the market movements: EUR/USD shoots despite the hard line inclination of the Fed
- EUR/USD increased despite the hard line comments of the Fed president, Jerome Powell, who said that the Fed is not in a hurry to cut interest rates. The governor of the Fed, Michael Barr, said that monetary policy is well positioned for Fed to wait and see economic evolution.
- The president of the Fed in New York, John Williams, reiterated Powell’s comments, mentioning that tariffs could boost inflation and that economic growth will decelerate. He also noted that tariffs will probably impact growth and inflation in the coming months.
- The president of the Fed of Minneapolis, Neel Kashkari, said the Fed is in a waiting mode regarding monetary policy. He states that the Committee is evaluating the impact of tariffs on inflation. Echo of some of her comments was the governor of the Boston Fed, Susan Collins, who said that the current state of monetary policy is necessary.
- The US Agenda revealed the latest consumer confidence data of the US consumer by the Board Conference, with the June figure falling to 93.0, from 98.0 in May and well below the expected reading of 100. According to Stephanie Guichard, senior economist of global indicators at the Board Conference, “the fall was widespread in all components, Consumers about current conditions and future expectations contributing to the fall. “
- The IFO business climate index of Germany rose to 88.4 in June, from 87.5 in May and slightly above the 88.3 forecast. Business expectations also showed improvement, rising to 90.7 from 88.9, exceeding 90.0 projections. Despite the optimistic data, the euro had little reaction.
- Financial market participants do not expect the ECB to reduce their deposit installation rate at 25 basic points (PBS) at the July monetary policy meeting.
EURO TECHNICAL PERSPECTIVE: EUR/USD remains bullish with buyers pointing at 1,1700 as the next resistance
The EUR/USD remains bullish, and after reaching a new maximum so far this year (YTD) of 1,1641, a greater increase in the short term is expected. The price action confirms the trend, while the relative force index (RSI) suggests that consolidation is coming.
EUR/USD needs a daily closure above 1,1650. A rupture of this level will exhibit 1,1700, followed by the key resistance levels of 1,1700 and 1,1800. On the contrary, a daily closure below 1,1600 could pave the way to test 1,1550, followed by the 1,1500 mark. Once overcome, the following support would be the weekly opening in 1,1454.
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.
