This article is a rewritten and expanded version of a news analysis originally published on FXStreet by Anil Panchal. The original article can be accessed at FXStreet’s EUR/USD News section. The rewritten text provides an in-depth overview of the current dynamics impacting the EUR/USD currency pair, with detailed explanations and updates for a wider audience.
Title: EUR/USD Recovers From Lows as Market Awaits U.S. CPI Data and Tariff Announcements
The EUR/USD currency pair is showing signs of recovery after experiencing moderate declines. Traders and investors are now turning their attention to anticipated U.S. inflation data and potential trade tariffs that could influence global currency movements. These key economic factors are expected to significantly affect market sentiment and impact the direction of monetary policy, particularly with regard to the U.S. Federal Reserve’s future decisions.
Following Thursday’s volatile trading session, the EUR/USD pair rebounded from intraday lows near 1.0800, registering a slight uptick heading into the European market open. The change in momentum comes amid cautious optimism and expectation-driven trading, as market participants await fresh catalysts that could determine the currency pair’s short- to medium-term trajectory.
Key Factors Influencing EUR/USD:
Several macroeconomic and geopolitical elements are contributing to the current movement in the currency pair:
1. U.S. Consumer Price Index (CPI) Data
– The U.S. Bureau of Labor Statistics is scheduled to release Consumer Price Index (CPI) figures today.
– The CPI is a major inflation indicator, particularly significant to the U.S. Federal Reserve’s monetary policy.
– Economists expect a modest increase in headline inflation with core inflation remaining subdued.
– A hotter-than-expected reading could strengthen the U.S. dollar, while a softer print may prompt further dollar weakness.
2. Federal Reserve Monetary Policy Outlook
– The Fed has maintained a cautious tone on interest rate cuts, emphasizing data dependency.
– Recent economic releases, such as the labor market report and ISM Services PMI, have conveyed mixed signals.
– Fed Chair Jerome Powell’s recent testimony reiterated that the Fed awaits more concrete evidence of a sustainable decline in inflation.
– The possibility of two interest rate cuts in the second half of 2024 still remains, depending on inflation trends.
3. Trade Tensions and Tariff Expectations
– Reports suggest that the U.S. may potentially introduce additional trade tariffs, particularly targeting imports from China.
– The European Union may also respond or be indirectly affected by any changes in global trade patterns.
– The anticipation of tariff announcements has caused uncertainty in the global markets, weighing on risk sentiment.
4. Market Sentiment and Risk Appetite
– Global equity markets have shown signs of hesitation due to geopolitical and economic uncertainties.
– Investors are showing preference for safer assets including the U.S. dollar and Treasury bonds.
– The euro has remained relatively resilient, supported by regional economic rebound and steady ECB commentary.
5. Technical Factors and Market Positioning
– Technical charts reveal that EUR/USD found support at the psychological level near 1.0800.
– Short-term resistance appears to be located near the 50-day simple moving average, around 1.0850.
– Momentum and Relative Strength Index (RSI) indicators on the 4-hour and daily charts show consolidation trends.
EU Outlook Remains Moderately Positive:
In the Euro Area, economic data has recently shown signs of stabilization. The European Central Bank (ECB) has maintained its stance that inflation is on track to return to the 2 percent target over the medium term, justifying their recent interest rate cut. However, ECB policymakers have emphasized that further rate adjustments will depend on evolving macroeconomic conditions and incoming data.
Key points from the Eurozone:
– The ECB executed its first rate cut in several years at its June policy meeting, reducing the deposit rate to 3.75 percent.
– Headline inflation in the Euro Area
Read more on EUR/USD trading.