- US PPI and CPI disappoint, reinforcing the disinflation narrative and affecting the dollar negatively.
- Trump’s unresolved tariff threats add to the US dollar’s struggles and diminish demand for high-yield currencies.
- ECB’s Schnabel suggests an end to the tightening cycle, pushing the euro to a three-year high despite weak data.
The EUR/USD has gained for a second consecutive day, trading up by over 0.70% and nearing a three-year peak at 1.1631.
As of now, the pair is sitting at 1.1575 after the US Bureau of Labor Statistics released the May Producer Price Index (PPI), which showed ongoing growth. The Consumer Price Index (CPI) data, released Wednesday, also contributed to this. Additionally, employment figures indicated an increase in unemployment benefits claims in the US.
The US dollar faced further losses as EUR/USD pushed past 1.1600. Moreover, President Trump stirred the markets with his announcement of potential unilateral tariffs, set to be introduced ahead of the July 9 deadline.
In Europe, prominent ECB voices, particularly Isabel Schnabel, conveyed a hawkish stance concerning the end of the tightening cycle, indicating that the financial environment is no longer restrictive.
This Friday, the Eurozone’s economic agenda includes reports on German and French inflation for May. Simultaneously, industrial production in the EU is anticipated to show continued decline in both annual and monthly metrics.
In the US, the upcoming schedule features the University of Michigan’s consumer sentiment report for June, focusing on household inflation expectations.
Daily Digest Market Mover: EUR/USD weak US dollar, cool PPI report
- The EUR/USD seems likely to stay within a 1.1500-1.1600 range short-term, influenced by positive developments in US-China talks, potentially increasing interest in riskier assets. Trump’s controversial action has stirred “American” trade for the first time this week.
- The US Producer Price Index (PPI) rose by 2.6% in May, slightly above April’s 2.5%. Core PPI decreased from 3.1% to 3%, with both headline and core PPIs rising by 0.1% monthly, which was lower than forecasts, indicating subdued inflation pressures.
- ECB’s Villeroy indicated that even if the 2025 fiscal deficit projections are lowered, it will remain a challenge. ECB’s Patsalides mentioned that the ECB is flexible and adaptable.
- ECB’s Simkus highlighted the need for rates to decrease, citing an increasing risk of inflation falling below expectations. He also noted that the ECB has reached neutral rates.
- Market players are not anticipating a reduction of the ECB’s deposit facility rates to 25 basis points in the upcoming July meeting.
Euro Technology Outlook: EUR/USD nears three-year high, surpasses 1.1600
The uptrend for EUR/USD is ongoing, and clearing the 1.1600 mark opens the path to challenge 1.1650, approaching 1.1700. This pair has shown a series of higher highs and lower lows, and the relative strength index (RSI) indicates that buyers maintain control, suggesting further upward potential.
Conversely, if EUR/USD loses momentum and dips below 1.1550, a pullback to 1.1500 is expected. A breach of this level could expose 1.1450 and lead to additional downtrends. Key support levels to observe include the 20-day Simple Moving Average (SMA) at 1.1366 and the 50-day SMA at 1.1304, followed by 1.1300.
