- EUR/USD decreased by 0.30%, currently trading at 1.1605 after reaching a high of 1.1675 during the day.
- Investors bought US dollars in anticipation of the July CPI release, which could undermine expectations for rate cuts from the Federal Reserve.
- In Italy, July’s inflation remained steady at 1.7% year-on-year, aligning with the ECB’s targets and last month’s figures.
- Discussions between Trump and Putin might advance peace talks in Ukraine and reduce energy costs for the EU.
On Monday, the EUR/USD saw a decline of 0.26%, as traders showed interest in the dollar leading up to another inflation report from the US, expected on Tuesday. This situation points to maintaining interest rates at the next meeting, in light of Italy’s data indicating inflation has met ECB goals. The currency pair is trading at 1.1615 after hitting a daily peak of 1.1675.
Despite expectations that talks between US President Donald Trump and Russian President Vladimir Putin might yield positive outcomes regarding a ceasefire in Ukraine, the euro’s upward trend has stalled. Since many EU nations import energy, successful negotiations could potentially bolster the euro, while peace agreements might help in lowering prices amid ongoing tensions.
Market participants are also keeping an eye on the upcoming US July Consumer Price Index (CPI) figures. A rise beyond expectations could sway traders to consider the probability of the Fed implementing rate cuts.
Italy’s inflation reported a 1.7% increase in July, consistent with June’s data as anticipated.
The economic agenda for the EU includes the German and EU ZEW surveys for August, information on French inflation, and growth statistics for the bloc. Meanwhile, in the US, upcoming releases will cover consumer and producer data, remarks from the Fed, unemployment claims, industrial production metrics, retail sales, and inflation figures from the University of Michigan’s consumer sentiment index.
Daily Digest Market Mover: Euro is booking profits as traders await inflation data
- The outlook for EUR/USD indicates potential dips as investors brace for July’s CPI data. Predictions suggest a rise in headline prices to 2.8% from June’s 2.7%. The core CPI is also expected to cross the 3% mark for the first time since February.
- If inflation in the US increases, the Fed might decide against changing rates at the September meeting, likely leading to a further decline for EUR/USD.
- The US Dollar Index (DXY), monitoring the dollar’s performance against a basket of currencies, rose 0.26% to 98.52.
- The European economic calendar appears sparse as investors await key releases, including the German ZEW survey, German inflation stats, and employment and growth data from the Eurozone.
- Recent US economic data has sparked investor speculation that the Fed might restart its easing cycle in September, with the probability for a quarter-point cut estimated at 85%.
- For the European Central Bank (ECB), expectations of a pause in the easing cycle at the upcoming September meeting are rising, with a 91% chance that no changes will be made and only a 9% likelihood of a 25bps rate cut.
Technical Outlook: Traders eye key support levels as EUR/USD approaches 1.1600
EUR/USD’s upward movement has stalled, resulting in consecutive bearish candles, but it’s still above the 1.1600 level. The relative strength index (RSI) suggests that when it dips below 50, it indicates bearish sentiment, likely showing that buyers are losing momentum.
Sellers might need to push the pair below 1.1600 each day. If that happens, the next support level would be 1.1527, established on August 5th. A break below this would indicate a movement towards 1.1500. Conversely, should EUR/USD exceed 1.1600, traders might then look towards 1.1650, rather than hitting the 1.1700 threshold.
