- EUR/USD is showing strength near 1.1000 as the US Dollar weakens on rising Fed rate cut bets.
- The Euro is gaining ground on expectations that the ECB will cut interest rates more gradually.
- Investors are awaiting US inflation data for further guidance on interest rates.
EUR/USD regains a seven-month high, slightly above 1.1000 in the European session on Wednesday. The major currency pair is upbeat due to the outperformance of the Euro (EUR) against its major peers. The Euro performs strongly on expectations that the European Central Bank (ECB) will further cut its key interest rates, albeit in a gradual manner.
The ECB began its policy easing cycle in June after officials gained confidence that price pressures will return to the bank’s 2% target by 2025. However, policymakers continued to refrain from committing to a predefined approach to interest rate cutting, as they are concerned that an aggressive expansionary monetary policy stance could re-accelerate inflation again.
A Reuters poll conducted between August 8 and 13 showed more than 80% of respondents expect the ECB to cut interest rates twice more this year, once in September and again in December.
On the economic front, Eurostat has published revised estimates of preliminary Gross Domestic Product (GDP) for the second quarter. The report showed that the Eurozone economy expanded by 0.3%, in line with the preliminary figures and the growth rate recorded in the first quarter of this year.
Market Movers: EUR/USD Capitalizes on Euro Strength
- EUR/USD is holding on to gains around the psychological resistance of 1.1000 in the European session on Wednesday, its highest level in around seven months. The major currency pair is strengthening as the near-term outlook for the US Dollar (USD) is subdued due to firm speculation that the Federal Reserve (Fed) will start cutting interest rates in September. The US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, is hovering near a weekly low at 102.55.
- Market expectations for Fed interest rate cuts in September strengthened further after the US Producer Price Index (PPI) report for July indicated that price pressures are on track to return to the target rate of 2%. The headline and core PPI, which excludes the volatile food and energy items, softened on both a monthly and annual basis. This suggests that producers are losing pricing power due to deteriorating demand conditions.
- As for interest rate guidance, Atlanta Fed President Raphael Bostic said Tuesday that he has recently increased his confidence that inflation will return to 2%, but he wants a little more evidence to support interest rate cuts.
- For further evidence, market participants will focus on the US Consumer Price Index (CPI) data for July, due out at 12:30 GMT. The CPI report is expected to show that monthly headline and core inflation rose by 0.2%. Annual headline and core inflation are estimated to have slowed by one-tenth to 2.9% and 3.2%, respectively.
- A soft inflation reading would raise expectations for Fed interest rate cuts and enhance speculation that the Fed will aggressively reduce its key interest rates. Conversely, high inflation numbers would dampen this.
Euro price today:
Euro PRICE Today
The table below shows the exchange rate of the Euro (EUR) against major currencies today. The Euro was the strongest currency against the New Zealand Dollar.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | 0.25% | 0.38% | 0.45% | 0.23% | 0.28% | 1.29% | 0.00% | |
| USD | -0.25% | 0.13% | 0.21% | -0.01% | -0.02% | 1.06% | -0.24% | |
| GBP | -0.38% | -0.13% | 0.09% | -0.13% | -0.10% | 0.93% | -0.34% | |
| JPY | -0.45% | -0.21% | -0.09% | -0.20% | -0.19% | 0.83% | -0.39% | |
| CAD | -0.23% | 0.00% | 0.13% | 0.20% | 0.00% | 1.05% | -0.19% | |
| AUD | -0.28% | 0.02% | 0.10% | 0.19% | -0.01% | 1.00% | -0.25% | |
| NZD | -1.29% | -1.06% | -0.93% | -0.83% | -1.05% | -1.00% | -1.23% | |
| CHF | -0.01% | 0.24% | 0.34% | 0.39% | 0.19% | 0.25% | 1.23% |
The heatmap shows percentage changes of 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 chart will represent EUR (base)/USD (quote).
Technical Analysis: EUR/USD Delivers Channel Breakout
EUR/USD marks a fresh seven-month high above 1.1000. The major currency pair strengthens after a breakout of the Channel formation on a daily time frame. The upward sloping 20-day exponential moving average (EMA) near 1.0900 suggests that the short-term outlook for the shared currency pair is bullish.
The 14-day Relative Strength Index (RSI) jumps into the 60.00-80.00 range, indicating that momentum has tilted to the upside.
On the upside, the August 10, 2023 high at 1.1065 and the round-level resistance at 1.1100 will act as a major barrier for the Euro bulls.
Alternatively, a move below the August 1 low at 1.0777 would drag the asset towards the February low near 1.0700. A break below the latter would expose it to the June 14 low at 1.0667.
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.
