- EUR/USD falls after the US inflation report that exceeds forecasts, reinforcing the Fed position of maintaining stable rates.
- Trump presses for rates cuts, threatens with more tariffs, seals commercial agreement with Indonesia.
- The Zew feeling of Germany Salta to 52.7, the highest since February 2022.
The EUR/USD fell around 0.55% on Tuesday after the latest US inflation report revealed that prices are rising, justifying the current federal reserve position. Therefore, the operators reduced the bets that the Fed would cut the rates at the July meeting. At the time of writing, the pair is quoted at 1,1599, having reached a maximum of 1,1694.
The consumer price index (CPI) in June exceeded estimates in the general and underlying figures. Apart from this, the US president, Donald Trump, demanded that the FED reduce interest rates, revealed a commercial agreement with Indonesia and threatened to impose additional tariffs on Russia.
The president of the Boston Fed, Susan Collins, said she is in no hurry to cut rates, since the data suggests that tariffs will increase prices.
On the other side of the Atlantic, the Economic Agenda of the European Union (EU) revealed that the Zew economic feeling index of Germany improved 52.7, above the estimates of 50.4 and above the reading of June 47.5, the highest level since February 2022.
What moves the market today: EUR/USD in recoil for uncertainty on an agreement between the EU and the USA.
- The latest US inflation data showed that the Consumer Price Index (CPI) increased 2.7% year -on -year in June, coinciding with market expectations. The underlying IPC stood at 2.9%, just below the 3.0% forecast but still significantly above the 2% target of the Federal Reserve. After the data, the monetary markets reduced the bets that the Fed will cut the rates at the July meeting, with the operators looking at 43 pbs of relaxation.
- Consequently, monetary markets had discounted less than 50 basic points (PBS) of relaxation, with investors discounting more than 43 pbs of feat cuts towards the end of the year.
- The president of the USA, Donald Trump, presented a new commercial agreement with Indonesia, under which Indonesian products will face a 19%tariff, while US exports will be exempt from tariffs. He added that similar agreements are being prepared, and that “Indonesia has committed to buy 15,000 million dollars in the US energy, 4.5 billion dollars in American agricultural products and 50 Boeing airplanes, many of them 777”.
- The Wall Street Journal reported that the EU plans retaliation tariffs for US products if a commercial agreement is not reached. They aim at airplanes and alcohol. The EU Commission of Commerce, Sefcovic, will talk to the USTR Jamie Greer “this afternoon.”
- Trump’s letter to the EU activated the alarms in the European Central Bank (ECB), which prepares to paint a more negative scenario next week than was previously thought in June. However, operators seem convinced that the ECB will keep the rates without changes in the next meeting.
- Joachim Nagel of the ECB said that a firm hand is needed in the ECB rates, according to Handelsblatt.
EURO TECHNICAL PERSPECTIVE: EUR/USD exceeds the 20 -day SMA, more fall is expected
After overcoming the simple mobile average (SMA) of 1,1679, the EUR/USD remains with a neutral bassist trend, with sellers looking for more losses. The momentum is bassist, as indicated by the relative force index (RSI), but has become flat. This indicates that consolidation is coming.
If the EUR/USD falls below 1,1600, the following support would be the 50 -day SMA in 1,1481. Once surpassed, the next stop would be the figure of 1,1400, followed by the 100 -day SMA in 1,1254. On the contrary, if the PAR exceeds the 20 -day SMA, a movement towards 1,1700 is expected, followed by the maximum daily of July 20 in 1,1749, before 1,1800 and the recent maximum of 1,1829.
EURO – FREQUENT QUESTIONS
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.
