The EUR/USD pair had a fleeting surge but couldn’t breach the 1.10 mark despite the US Federal Reserve’s potential rate reduction. Even as the dollar displayed resilience, the market’s focus was on the Federal Reserve’s forthcoming monetary policy decision. This left investors acutely observing market trends and economic indicators.
The financial markets continue to cautiously fluctuate during these unpredictable times. There are predictions that the Fed might introduce more drastic monetary policies to boost the economy, possibly moving the EUR/USD pair to the elusive 1.10. The pair, however, currently remains trapped within its recent ranges, awaiting a strong catalyst to move past the 1.0950 level.
With the trading week’s economic forecast uncertain, Tuesday’s announcement of the EU Retail Sales data could influence the Euro’s direction. The June year-end data is expected to show a slowdown to 0.1%, which if weaker than expected, may pressure the Euro. Additionally, Friday’s upcoming U.S employment data has the potential to provide insights into the U.S economy’s strength and indirectly affect the Euro.
Purchasing Managers Index data from around the world were varied, with U.S. Composite PMI for July not meeting the prediction of 55.0, while ISM Services exceeded expectations. The market eagerly awaits potential adjustments from the European Central Bank next week in response to these developments, most notably a potential double-cut from the Fed largely based on inconsistent US data.
Technically, the EUR/USD pair has managed to escape its downward trajectory but lacks bullish momentum which might hinder offers at the 200-day Exponential Moving Average (EMA) at 1.0801.
Euro’s elusive breach of 1.10 despite Fed’s potential cut
Despite this, a trend of higher lows could suggest an impending bullish phase. However, various global economic factors, such as geopolitical tensions and central bank decisions, could impact the pair’s movement, requiring investors to remain vigilant and prepared for potential market changes.
The Euro is a powerful player in the Forex market, making up 31% of all foreign exchange transactions in 2022, with a daily average turnover exceeding $2.2 trillion. However, changes in the European Central Bank’s (ECB) policies, inflation data, and GDP growth, among others, can impact its value significantly. The ECB oversees monetary policies for price stability, with its actions concerning interest rates directly affecting the Euro’s value.
Inflation data, represented by the Harmonized Index of Consumer Prices (HICP), also critically affects the Euro’s value. Key political events and related policies can influence Euro’s strength. For instance, trade disputes, economic interventions, geopolitical tensions, or the financial stability of Eurozone member nations can all sway the Euro’s value. Therefore, the influence of major trading partners, such as the U.S., is essential due to the inverse relationship between them.
