- The euro rises after bouncing a minimum of three weeks, again above 1,1600.
- Trump suggests that he will say goodbye to the president of the Fed, Powell, but then backed up in his comments, criticizing him for the delays in the fees.
- The US IPP is below the estimates, reinforcing the dovish inclination but limiting the progress of the euro.
EUR/USD maintains previous 0.25% profits on Wednesday after the US president Donald Trump threatened to dismiss the president of the Federal Reserve (Fed), Jerome Powell. This, together with a weakest inflation report of what was expected on the side of the producers, limited the progress of the euro against the US dollar. At the time of writing, the pair is negotiated in 1,1633 after bouncing of minimum of three weeks of 1,1562.
During the American session, the headlines initially suggested that Trump would fire Powell imminently. However, he then denied those rumors, although he continued to criticize him, saying that Powell has been too slow to cut the interest rates. In the Data Front, the US Production Price Index (IPP) was below the estimates and reading of May in general and underlying terms.
The president of the Fed of Atlanta, Raphael Bostic, said he does not focus on the news reports about the Fed, but on matters that really matter. The Fed presented its Book Beige de Mayo, which painted a solid economic panorama, since the activity increased slightly from the end of May to the beginning of July.
The Eurozone calendar remained empty on Wednesday, with the operators attentive to the publication of the Harmonized Consumer Price Index (HICP) of June before the monetary policy meeting of the European Central Bank (ECB) of July 24. Recent comments from several members have shown that the Governing Council is divided by cutting or keeping rates without changes.
What moves the market today: the EUR/USD recovers 1,1600 but it is still fragile
- The president of the Fed of Atlanta, Bostic, said he would currently wait to cut rates, since inflation is not in the objective of the Fed, adding that the data will guide their decisions in the next period. He affirmed that the Fed operates by committee with a diversity of opinions.
- Fed’s beige book showed that economic activity increased, although uncertainty remains high and the panorama is neutral to slightly pessimistic. As for the labor market, employment increased something in general, although hiring was limited due to economic uncertainty and ongoing policies. The book revealed that prices, despite moderating, had increased due to tariffs, particularly for raw materials, and companies expect cost pressures to remain high.
- The US Production Price Index. The underlying IPP, which excludes food and energy, was also softened to 2.6%from 3.0%, failing the provisions of 2.7%. While inflation at the factory level has shown signs of cooling, consumer inflation is still increasing, with June CPI data indicating that prices are approaching 3%, even above the 2% target of the Federal Reserve.
- The probabilities of interest rates show a 95% probability that the Fed maintains rates without changes in its July 30 meeting, with only 5% probability of a 25 basic points cut. In broader terms, monetary markets have discounted less than 50 basic relief points for the rest of the year, with current expectations pointing to about 46 PBs in total cuts by the end of the year.
- 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.
- Since last week, ECB members have expressed their opinions about monetary policy. Centeno favors a break or cut, adding his name to the Demarcco, Vujcic and Villery list. Supporting a rate cut is Fabio Panetta, who has been a member of the downward risks for growth. On the contrary, Isabel Schnabel said that the rates are in a good place and supports keeping the rates without changes, echoing Robert Holzmann’s comments to expect more data.
EURO TECHNICAL PERSPECTIVE: The EUR/USD fights in the 20 -day SMA, it is expected more down
The EUR/USD is neutral to rise biased, although to consolidate the upward trend, operators need to achieve a daily closure above the simple mobile average (SMA) of 20 days in 1,1681. Once this was done, the way for more profits would open, with 1,1700 as the following objective. Followed by the maximum daily of July 20 in 1,1749, before 1,1800 and the historical maximum of 1,1829.
On the contrary, a fall below 1,1600 would put the minimum of 1,1562 at stake at stake. A rupture of the latter will expose the 50 -day SMA in 1,1482, followed by the 100 -day SMA in 1,1254.
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.
