- EUR/USD falls on weaker-than-expected economic data from the EU, facing strong headwinds from the energy crisis, and slower economic growth.
- US GDP in the second quarter showed signs of contraction, meaning the US is in a “technical recession”.
- Inflation in Germany hovers around 8.6% y/y, while EU economic sentiment plummets.
The EUR/USD down from daily highs above 1.0200, paring some of Wednesday’s gains. On Wednesday, the market saw a slightly “dovish” bias from Fed Chairman Jerome Powell, as most G8 currencies rose against the greenback. Furthermore, the fact that the US economy enters a “technical recession”, as reported by the US Department of Commerce, would keep the pressure on the USD.
EUR/USD is trading at 1.0170 after hitting a daily high of 1.0234, but fell on worse-than-expected EU Consumer and Economic Confidence figures, plunging towards a daily low of 1.0114, earlier to rebound after the dismal US economic data.
EUR/USD, unable to take advantage of dollar weakness, could continue to fall
Sentiment remains positive and will probably end that way. Data from the US Department of Commerce showed that US GDP in the second quarter contracted 0.9%, less than the forecast growth of 0.4%. That said, coupled with money market futures, a less “aggressive” Fed is priced in than previously estimated, with a 75 basis point rate hike in September likely to be 78%.
At the same time, the US Department of Labor reported that initial jobless claims for the week ending July 23 rose by 256,000, more than the estimated 253,000. However, it fell compared to the week ending July 16, which came in at 261,000.
Elsewhere, the US Dollar Index is almost flat at 106.473 after hitting a daily high of 106.975. US Treasury yields also fell, led by US 10-year Treasury yields which fell ten basis points to 2,680%.
In the European session, inflation in Germany unexpectedly rose in June, with the IPCA rising 8.5%, above estimates and beating the previous figure of 8.3%. In the non-harmonized estimates, inflation in Germany fell slightly to 7.5%, from the previous reading of 7.6%.
Earlier, EU Economic Sentiment fell to 99 in July, disappointing estimates of 102. In the same vein, EU Consumer Confidence fell to -27.0 from -23.8 in June.
What must be considered
On Friday, the EU economic calendar will include GDP growth and inflation figures for the Eurozone, France, Italy and Spain. In addition, employment data and GDP growth for Germany will be published. In the United States, June’s Core and Headline PCE Price Index, Chicago PMI and July University of Michigan Consumer Sentiment will be released.
EUR/USD Key Technical Levels
Source: Fx Street
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