- EUR/USD rises to 1.0780 as US Dollar corrects, and preliminary Eurozone services inflation for June remains persistent.
- US Dollar falls as Fed’s Jerome Powell remains confident disinflation has resumed.
- The Eurozone headline CPI slowed as expected, while the core figure grew steadily year on year.
EUR/USD jumps to near 1.0770 in the American session on Wednesday after a strong recovery from the round-level support of 1.0700 on Tuesday. The EUR/USD pair extends its recovery as persistent preliminary Eurozone services inflation for June deepens fears that price pressures will remain elevated for a longer period.
Moreover, other components of the preliminary Eurozone Harmonized Index of Consumer Prices report showed that headline inflation slowed as expected to 2.5% from May’s reading of 2.6%. Over the same period, core CPI excluding volatile items rose at a steady pace of 2.9% and remained above estimates of 2.8%. The headline data did not provide clarity on where price pressures are headed and kept the European Central Bank’s (ECB) interest rate outlook uncertain.
However, ECB President Christine Lagarde told the ECB Forum on Central Banking that inflation is moving in the right direction, and the central bank is well advanced on the path to disinflation.
On the interest rate outlook, ECB policymaker and Central Bank of Ireland Governor Gabriel Makhlouf said he was comfortable with one more rate cut this year, but not with market expectations of two. However, he did not rule out the possibility.
On the political front, the centrist alliance and the left in the European Union’s second-largest nation withdrew more than 200 candidates from Sunday’s parliamentary elections in an attempt to prevent the far-right from winning an outright majority.
Market Movers: EUR/USD Strengthens as US Dollar Falls
- EUR/USD recovers further to near 1.0780 as US Dollar (USD) corrects further. The US Dollar weakens as the number of people hired by private employers unexpectedly came in lower at 150,000 compared to the previous release of 157,000, revised down from 152,000. Economists had expected new payrolls to come in slightly higher at 160,000. This has raised uncertainty about the labor market outlook.
- The US dollar was already under pressure as Federal Reserve (Fed) Chairman Jerome Powell’s comments at the ECB Forum on Central Banking indicated that the US economy has resumed its path towards disinflation.
- Powell said recent data indicate the disinflation process has resumed and added that the central bank has made good progress on inflation. However, he also said policymakers want to see more good inflation data before cutting interest rates. Powell’s comments were much more in line with expectations and his speech at the June policy meeting.
- Meanwhile, expectations that the Fed will cut interest rates twice this year and start the easing cycle from the September meeting remain firm. Looking ahead, investors will pay close attention to the US Non-Farm Payrolls (NFP) data for June, due out on Friday. The NFP report will indicate the current state of labor demand and wage growth, which will influence market speculation about Fed rate cuts in September.
- The US Dollar will remain uncertain on an eventful Wednesday as the ISM Services Purchasing Managers’ Index (PMI) and the Federal Open Market Committee (FOMC) Minutes for June are scheduled for release.
Technical Analysis: EUR/USD marks a fresh two-week high near 1.0780
EUR/USD is rallying near 1.0770 after a decisive breakout of the Japanese hammer candlestick formation on a daily time frame. The overall trend remains sideways amid a symmetrical triangle formation that exhibits a contraction in volatility.
Last week, the major currency pair bounced after finding strong buying interest near the ascending border of the symmetrical triangle formation near 1.0666, which is marked from the October 3, 2023, low of 1.0448. The descending border of the mentioned chart pattern is drawn from the July 18, 2023, high of 1.1276. The symmetrical triangle formation exhibits a strong contraction in volatility, indicating low volume and narrow ticks.
The EUR/USD pair is approaching the 200-day exponential moving average (EMA), which is trading around 1.0790.
The 14-period RSI is fluctuating in the range of 40.00-60.00, suggesting indecision among market participants.
Economic indicator
ADP Employment Report
The employment data is prepared by Automatic Data Processing Inc. The U.S. nonfarm private sector payrolls index is published monthly in collaboration with Moody’s Analytics. It is an estimate of the change in the number of people employed in the U.S. nonfarm private sector. A positive number means that the private sector saw an increase in payrolls, while a negative number means that the private sector saw a decrease. Figures that exceed expectations are generally positive for the dollar, while figures that fall short are negative.
Latest Post: Wed Jul 03, 2024 12:15 PM
Frequency: Monthly
Current: 150K
Dear: 160K
Previous: 152K
Fountain: ADP Research Institute
Traders often consider employment figures from ADP, the largest payrolls provider in the United States, to be the harbinger of the Bureau of Labor Statistics’ Nonfarm Payrolls release (usually released two days later), due to the correlation between the two. The overlap of both series is quite high, but in individual months, the discrepancy can be substantial. Another reason currency traders follow this report is the same as with the NFP: vigorous and persistent growth in employment numbers increases inflationary pressures, and with them, the likelihood of the Fed raising interest rates. Actual figures that beat consensus tend to be bullish for the USD.
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.
