- EUR/USD remains stable at 1.1573 as EU services PMI data and soft US ISM figures circulate.
- Trump confirmed that Scott Bescent turned down consideration for a Fed governor position following Coogler’s resignation.
- Eurozone PMI reports show mixed results: service sectors in Germany and Spain improved, while France and Italy fell short.
- Traders are preparing for upcoming Fed comments and key European data, including Germany’s factory orders and eurozone retail sales.
The EUR/USD pair held steady during Tuesday’s North American session, as traders processed the latest US employment figures along with further data releases. On the European side, the HCOB flash PMI numbers offered mixed results, yet they failed to boost the euro against the dollar. As of now, the pair is trading at 1.1573.
In other developments, US President Donald Trump is reportedly considering nominating the US Treasury Secretary for a position at the Federal Reserve, following the resignation of Adriana Coogler as Fed Governor on August 8.
The latest data from the Institute for Supply Management (ISM) shows stagnation in business activities within the services sector. In June, the US Department of Commerce reported a trade deficit at nearly two-year lows, while China’s trade gap has been narrowing.
After the data release, EUR/USD remained within known boundaries, as PMI metrics rolled in, hovering around economists’ predictions.
Across the EU, the HCOB Services PMI presented slight declines, dropping from 51.2 to 51.2 as anticipated for July. It fell further to 48.5 from the previous month’s 49.7. Expectations had risen from 52.1 to 52.3 but still landed below the estimates.
Spain and Germany emerged as outliers, showcasing enhancements in their service sectors, although the overall response in EUR/USD remained unchanged.
Looking ahead, Federal Reserve speakers are set to address the US economic landscape, with traders focused on Boston’s Susan Collins, Governor Lisa Cook, and Mary Daly in San Francisco. Meanwhile, German factory orders and EU retail sales data are anticipated to shed light on the eurozone’s economic health.
Daily Digest Market Mover: Euro reacts to mixed EU PMI, traders keen on Fed policy cues
- ISM Services PMI decreased from 50.8 in June to 50.1 in July, missing hopes for a rise to 51.6. Meanwhile, the US trade deficit shrank to its lowest level in almost two years, indicating improved trade dynamics despite weaker domestic demand.
- In June, the trade balance for US goods and services recorded a deficit of -$60.2 billion, bettering the -$71.7 billion of May and below the forecast of -$61.6 billion. The Bureau of Economic Analysis (BEA) noted a notable reduction in the trade gap with China, reaching lows not seen in 21 years.
- San Francisco President Mary Daly mentioned that banks “can’t wait forever,” as signs of a weakening labor market emerge. Daly’s dovish comments seem to have swayed market expectations regarding a potential Fed easing cycle in upcoming meetings. The CME FedWatch tool indicates a 90% chance for a 25 bps rate cut in September, up from previous weeks’ 80% and 60% projections.
- Goldman Sachs anticipates three 25 basis point reductions before year-end, suggesting a cut at every meeting, with the potential for a 50 basis point cut in September if the US labor market shows further signs of deterioration.
Technical outlook: Euro/USD struggles at 1.1600 due to weak momentum
EUR/USD continues to test the 1.1600 threshold, but upward momentum remains limited. The relative strength index (RSI) sits in the bearish territory yet edges closer to neutral lines, indicating a growing interest in buying.
A decisive move above 1.1600 could pave the way for resistance at levels of 1.1650 and 1.1700, potentially testing a 20-day Simple Moving Average (SMA) at 1.1630. On the flip side, slipping below the 50-day SMA at 1.1576 could expose the pair to 1.1550, and further declines might reach as far as 1.1500, with an August low around 1.1391.
