- The EUR/USD has dipped from its daily peak of 1.1672 after the FREM release.
- The Fed indicates that employees perceive inflation risks as more significant than employment issues, implying this concern supersedes neutrality.
- In breaking news, Trump calls on Governor Lisa Cook to resign amid mortgage fraud allegations.
The EUR/USD is likely to see a gradual rise during the North American trading session following the release of the Federal Reserve’s recent meeting minutes. Currently, the pair is trading around 1.1660, marking a slight increase of 0.13%.
Hawkish Fed Minutes Restrain Euro Gains amid Trump’s Call for Governor Resignation
Recent minutes from the Fed’s August meeting reveal that most board members “see inflation risks as surpassing employment concerns,” with some officials suggesting that “current rates might not be far removed from neutral.” This statement conflicts with comments made by US Treasury Secretary Scott Bescent, who mentioned in a Bloomberg interview that interest rates ought to be lowered by 150 to 175 basis points.
Post-release of the minutes, the EUR/USD moved down from the daily high of 1.1672 to 1.1660, indicating a hawkish reaction from market participants.
At the same time, the White House is continuing to urge Fed officials to consider lowering interest rates.
A recently published article from Bloomberg pointed out that Bill Prute, head of the Federal Housing Finance Agency, alleged that Lisa Cook might have submitted “false bank documents and real estate records to secure better loan conditions and engage in mortgage fraud.”
On the European front, inflation in the eurozone for July remained stable, aligning with the European Central Bank’s (ECB) target of 2%.
Daily Digest Market Mover: Focus on EUR/USD for More Flexible US Dollars
- Delving deeper into the Federal Open Market Committee (FOMC) meeting minutes, several officials voiced apprehension regarding high asset valuations, noting, “Many (officials) highlighted that the overall impact of tariffs takes time.” Some Fed members anticipated that “businesses will pass these tariffs onto consumers,” and remarked, “a few participants indicated it might be either feasible or imprudent to fully clarify tariffs’ influence on inflation before adjusting monetary policy.”
- In July, the European Union (EU) registered a 2% increase in its Harmonized Index of Consumer Prices (HICP), meeting expectations. Core HICP figures remained at 2.3% year-on-year, consistent with June’s data.
- ECB President Christine Lagarde stated that recent trade transactions have alleviated uncertainty but warned that challenges persist. She emphasized that the European economy shows resilience despite a tough global landscape. Nevertheless, September forecasts for the Eurozone indicate anticipated growth slowdowns in the third quarter of 2025.
- The dynamics of EUR/USD are influenced by varying demands for safety and monetary policies between the Fed and the ECB. Market expectations for the Fed to decrease rates in September hover around 82%. Across the Atlantic, the ECB is expected to maintain its current stance, with central bank odds at 91%, indicating no changes and a minimal chance of a 25 basis point adjustment.
Euro Technical Outlook: EUR/USD Around 1.1650, Lacking Clear Direction
The EUR/USD maintains a neutral bias as shown by two technical signals. Short-term simple moving average (SMA) movements are nearly flat, and the relative strength index (RSI) is meandering around its neutral line.
If EUR/USD surpasses the August 19 peak of 1.1692, it may push toward 1.1700. The high of 1.1788 from July 24 is considered significant resistance, while levels of 1.1800 and 1.1829 could indicate further gains.
Conversely, a decline below the confluence of the 50-day and 20-day simple moving averages (SMA) at 1.1643/29 could lead to a downturn towards 1.1600.
