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EUR/USD falls to one-month lows amid Eurozone political uncertainty

  • EUR/USD weakens to 1.0730 on Monday amid multiple headwinds.
  • The Euro falls as French President Emmanuel Macron calls early elections, triggering political uncertainty.
  • Strong US labor market data dampens Fed rate cut expectations, increasing the appeal of the US dollar.

EUR/USD extends its decline to 1.0730 in the American session on Monday. The EUR/USD pair weakens due to political uncertainty in the Eurozone after French President Emmanuel Macron called early elections, weighing heavily on the Euro. Macron’s unexpected move on Sunday night came after exit polls indicated Marine Le Pen’s far-right National Rally (RN) party won between 32% and 33% of the seats in European parliamentary elections under the leadership of party president Jordan Bardella, which was more than double Macron’s centrist list.

After the dramatic announcement of early elections, Macron added: “I have confidence in our democracy, in letting the sovereign people have their voice. I have heard their message, their concerns, and I will not leave them unanswered,” The Guardian reported. However, there could be potential consequences if Macron’s party faces more losses than predicted by exit polls, which could deepen uncertainty over the Euro’s prospects.

On the monetary policy front, European Central Bank (ECB) policymaker and Deutsche Bundesbank president Joachim Nagel warned of a persistent inflation outlook, especially in the services sector, due to strong wage growth. Concerns about persistent inflation suggest the policy easing drive would be slow.

At the European session, ECB policymaker and Slovak central bank governor Peter Kazimir also said the central bank should not rush into another rate cut as progress on disinflation could be patchy. However, Kazimir remains confident that the ECB is moving towards the target.

ECB President Christine Lagarde already said at the monetary policy press conference after reducing the central bank’s deposit facility rate by 25 basis points (bps) to 3.75% that the bank is not committed to any path specific interest rates and will continue to depend on data, as inflation could remain volatile in the coming months.

Daily Market Summary: EUR/USD weakens ahead of US CPI, Fed policy decision

  • EUR/USD falls to 1.0730 on Euro weakness amid political uncertainty and US Dollar (USD) firmness as strong United States (US) labor market data has dampened job expectations. market for the Federal Reserve (Fed) to begin reducing interest rates from their current levels at the September meeting. The US Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, extends its recovery to a near four-week high near 105.30.
  • The CME FedWatch tool shows that 30-day fed funds futures price data suggests a 47% chance that the interest rate will be below the current level in September, down significantly from the 59.6% recorded ago. one week.
  • The US Nonfarm Payrolls (NFP) report for May showed on Friday that new hires were 272,000, higher than the expected 185,000 and the previous release of 165,000. Labor demand, which remains stronger than expected, continues to give Fed policymakers more time to maintain their current interest rate framework.
  • Average Hourly Earnings data, a measure of wage inflation that dictates household spending, was higher than expected. Annual wage inflation measures accelerated to 4.1% in May from the consensus of 3.9% and April’s reading of 4.0%. On a monthly basis, wage inflation measures rose sharply by 0.4% from estimates of 0.3% and the previous release of 0.2%.
  • Meanwhile, investors are focusing their attention on US Consumer Price Index (CPI) data for May and the Fed’s monetary policy decision, which are scheduled for Wednesday. The Fed is widely anticipated to keep interest rates steady in the 5.25%-5.50% range with a hawkish outlook, as the last mile for inflation to return to the desired rate of 2% appears to be more difficult.

Technical Analysis: EUR/USD stabilizes below 200-day DMA

EUR/USD returns within the symmetrical triangle formation on a daily time frame after failing to sustain the breakout move, suggesting that the move was false and the overall trend has turned bearish. The major currency pair is expected to find support near the ascending trend line of the mentioned chart pattern, drawn from the October 3, 2023 low at 1.0448, near 1.0636.

The long-term outlook for the pair has also turned negative as it falls below the 200-day EMA, which is trading around 1.0800.

The 14-period RSI drops sharply to 40.00. A decisive break below that level would trigger bearish momentum.

EUR/USD Price Today

PRICE of the Euro Today

The table below shows the percentage change of the Euro (EUR) against the major currencies listed today. The Euro was the strongest against the British Pound.

EUR -0.23% -0.00% -0.20% -0.08% -0.31% -0.26% -0.30%
USD 0.23% 0.14% 0.02% 0.14% -0.10% -0.04% -0.08%
GBP 0.00% -0.14% -0.08% -0.08% -0.31% -0.26% -0.31%
JPY 0.20% -0.02% 0.08% 0.13% -0.20% -0.16% -0.05%
CAD 0.08% -0.14% 0.08% -0.13% -0.21% -0.18% -0.23%
AUD 0.31% 0.10% 0.31% 0.20% 0.21% 0.05% 0.00%
NZD 0.26% 0.04% 0.26% 0.16% 0.18% -0.05% -0.05%
CHF 0.30% 0.08% 0.31% 0.05% 0.23% -0.01% 0.05%

The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen 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).

economic indicator

Fed interest rate decision

He committee of governors of the federal reserve announces the interbank interest rate. This rate affects a range of interest rates set by commercial banks, building societies and other institutions for their own borrowers and depositors. Any change in the trend observed in the statement accompanying the interest rate decision will affect the volatility of the dollar. If the Fed is firm on the economy’s inflationary outlook and raises rates, this is bullish for the dollar, while an outlook for reduced inflationary pressures will be bearish for the dollar.

Source: Fx Street

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