- The EUR/USD has risen by 0.39%, approaching yearly highs as a ceasefire reduces the demand for safe-haven dollars.
- Powell indicated that the policy is somewhat limited, but reductions could be considered if inflation is a factor.
- The IFO business environment shows improvement for six months. ECB officials suggest a steady trajectory, assuming inflation remains under control.
The EUR/USD climbed 0.39% for the fourth consecutive day, reaching an annual high of 1.1641, driven by a weakening US dollar following a ceasefire agreement between Israel and Iran. This development lifted market sentiment and depressed the greenback. As of now, the pair is trading at 1.1619, up by 0.38%.
The overall market mood is optimistic, contributing to the dollar’s decline. The US Dollar Index (DXY), which measures the dollar against a basket of six currencies, hovered around a weekly low of 97.70, down by 0.47%.
Notably, the New York Times recently reported that US intelligence indicates a strike in Iran did not effectively damage the nuclear site. Regardless, Wall Street seems set to finish Tuesday’s session positively.
During his testimony to the U.S. House of Representatives, Powell described the current fees as modestly restrictive. He noted that the Federal Open Market Committee (FOMC) might consider rate cuts if inflationary pressures arise.
In the European session, the Eurozone Economic Docket revealed that the IFO business environment index has improved for the sixth straight month, notwithstanding overarching geopolitical uncertainty. Additionally, some European Central Bank (ECB) officials have commented on their outlook.
Francois Villeroy from the ECB mentioned the possibility of rate cuts if inflation expectations stay moderate. Conversely, ECB’s Kazimir has shifted his stance, favoring a neutral position while maintaining current rate levels. He believes he is “on target concerning neutral speeds.”
Daily Digest Market Mover: EUR/USD Surges Despite Fed’s Hawkish Comments
- Even with Federal Reserve Chairman Jerome Powell’s hawkish remarks, the EUR/USD has increased, as the Fed expresses urgency about potential rate cuts. Fed Governor Michael Barr stated that monetary policy is well-positioned to adapt as economic conditions evolve.
- New York Fed President John Williams echoed Powell’s statements, discussing how tariffs could elevate inflation and hinder economic growth. He suggested tariffs might have a significant impact on both growth and inflation in the upcoming months.
- Neil Kashkari from the Federal Reserve Bank of Minneapolis emphasized that the Fed is adopting a wait-and-see approach regarding monetary policy, assessing the influence of tariffs on inflation. Boston Fed President Susan Collins shared similar sentiments.
- The latest US consumer confidence data reflects a drop to 93.0 in June, considerably below the anticipated 100, down from 98.0 in May.
- Germany’s IFO Business Environment Index increased to 88.4 in June, slightly above the forecast of 88.3 and up from 87.5 in May. Business expectations also improved, rising from 88.9 to 90.7, surpassing the 90.0 prediction. Even with this positive data, the Euro did not respond significantly.
- Market participants do not expect the ECB to reduce its deposit facility fees to 25 basis points (bps) in the upcoming July monetary policy meeting.
Euro Technology Outlook: EUR/USD Remains Bullish, Targeting 1.1700 as Next Resistance
The EUR/USD trend appears bullish after reaching a new year-to-date high of 1.1641. Price movements confirm ongoing trends, and the relative strength index (RSI) suggests continued upward momentum.
A daily close above 1.1650 is necessary; surpassing this level would expose resistance at 1.1700 and subsequently at 1.1800. However, falling below 1.1600 could lead to a test around 1.1550, with further support levels at 1.1500 and potentially 1.1454 to be monitored.
