- The PPI and the IPC of the US are below expectations, reinforcing the disinflation narrative and hitting the dollar.
- The unilateral threat of Trump tariffs deepens the fall of the US dollar and enlivens the demand for higher yield.
- The president of the ECB, Schnabel, points out the end of the flexibility cycle, sending the euro to maximum three years despite the weak data.
The EUR/USD advances for the second consecutive day, registering profits of more than 0.70% and contributing below the maximum of three years of 1,1631 previously reached, while the operators digest the latest report of the Production Price Index (IPP) in the United States, together with employment data.
At the time of writing, the PAR is quoted at 1,1575 after the US Labor Statistics Office (BLS) reported that the Production Price Index (IPP) in May indicated a continuous disinflation, aligning with the Report of the Consumer Price Index (CPI) published on Wednesday. Employment data revealed that more people are requesting unemployment benefits in the US.
The US dollar extended its losses with the data, with the EUR/USD rising above 1,1600. In addition, the US president, Donald Trump, shook financial markets by saying letters to countries, establishing unilateral tariff rates before a deadline of July 9 set on the day of liberation.
On the other side of the Atlantic, several speakers of the European Central Bank (ECB) were a hard line, led by Isabel Schnabel, who said the cycle of [flexibilización] Monetary policy is coming to an end, adding that financial conditions are no longer restrictive.
On Friday, the Economic Agenda of the Eurozone (EU) will include inflation reports for Germany and France in May. At the same time, the EU industrial production is expected to continue to slow down both in annual and monthly figures.
In the US, the calendar will include the consumer’s feeling index of the University of Michigan (UOM) for June, along with the expectations of homes inflation.
What moves the market today: the EUR/USD shoots at a weak US dollar, a soft PPI report
- The EUR/USD seems to be prepared to remain within the range of 1,1500-1,600 in the short term, since the positive news about the conversations between the US and China could increase the appetite for riskier assets. Trump’s controversial decisions triggered the trade of “selling America” ​​for the first time in the week.
- The US Production Price Index. The underlying PPI was reduced to 3% from 3.1%. In monthly terms, both the general and underlying PPI increased 0.1%, below expectations, reflecting a contained inflation pressure.
- Villeroy of the ECB says that a 5.4% budget deficit in 2025 is still available, even with downward forecasts. Patsalides of the ECB says that the ECB is flexible and agile in the rates.
- Simkus of the ECB says that rates may still need to lower since it has increased the risk that inflation is below the projections. He added that the ECB has reached a neutral rate.
- Financial market participants do not expect the ECB to reduce their deposit rate at 25 basic points (PBS) at the July monetary policy meeting.
EURO TECHNICAL PERSPECTIVE: EUR/USD almost maximum three years above 1,1600
The EUR/USD bullish trend is underway, and overcome the figure of 1,1600 has opened the door to challenge the figure of 1,1650, before 1,1700. The torque has reached a series of higher maximums and minimums, while the relative force index (RSI) indicates that buyers are in control, suggesting an additional bullish potential.
On the other hand, if the EUR/USD loses bullish impulse and slides below 1,1550, a setback is expected to 1,1500. A rupture of this last will expose 1,1450, clearing the way for more falls. The following key levels of support to try are the simple mobile average (SMA) of 20 days in 1,1366 and the 50 -day SMA in 1,1304, before 1,1300.
Euro Faqs
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.
