- The EUR/USD dips below 1.1700 as initial US unemployment claims exceed expectations.
- The Federal Reserve indicates some internal disagreement, with many members cautious about interest rate cuts.
- Trump’s tariffs on Brazil may trigger retaliation from President Lula.
The EUR/USD pair is experiencing a downturn during North American trading sessions, as market participants analyze recent employment figures in the US, which bolster the Fed’s stance ahead of the upcoming July meetings. Currently, the pair peaked at 1.1749, then fell to 1.1695.
Wall Street saw gains on Thursday as traders evaluated the US job market. Initial unemployment claims for the week came in below forecasts, showing some resilience, even as continued claims reached their highest level since 2022.
On Wednesday, the Fed’s latest minutes revealed some divisions among its members. While two governors discussed potential rate cuts at their next meeting, the majority cautioned that tariffs could trigger inflation, with only one member dissenting.
St. Louis Federal President Alberto Mu Salem suggested waiting for more incoming data before deciding on rate cuts. In contrast, San Francisco Fed President Mary Daly, identifying with the dovish side, supports two cuts, believing that tariffs’ impact will be more significant than initially thought.
President Trump’s announcement of a 50% tariff on Brazil in regard to trade issues drew a warning of retaliation from President Lula da Silva.
Across the Atlantic, Germany disclosed that inflation remains within the 2% target set by the Bundesbank and the European Central Bank (ECB).
This week, US economic reports will include a speech from Fed officials, while in the EU, ECB officials will release French inflation data.
Daily Digest Market Mover: Euro/USD Drops Below 1.1700 After Strong Employment Claims Report
- Last week’s unemployment claims indicated that 227,000 Americans filed for benefits, lower than expected and previous figures of 235K and 232K. However, continued claims have surged to their highest level in three and a half years, reaching 1.97 million.
- Fed Chair Jerome Powell noted that in the current environment of low employment and inflation, increased layoffs could quickly raise unemployment levels.
- Governor Christopher Waller emphasized that July rate cuts might be warranted, describing the current policy as “too restrictive.”
- St. Louis President Mu Salem stated that while the US economy is stable, there are rising inflation risks due to potential tariff impacts, alongside the weaker dollar possibly exacerbating inflation pressures.
- Mary Daly of the San Francisco Fed sees two possible interest rate cuts this year, predicting that tariff effects could be more pronounced than anticipated.
- Trump hinted at a tougher trade stance, announcing new duties on drugs, semiconductors, and copper, alongside a significant 50% tariff.
- In Germany, consumer prices rose 2% year-on-year in June, consistent with May’s figures.
Euro Technology Outlook: Once the Pair is Integrated, EUR/USD Holds at 1.1700
The EUR/USD is testing the 20-day Simple Moving Average (SMA) at 1.1663 early in the session, managing to hover around the 1.1700 mark. It’s expected to fluctuate within the 1.1660-1.1749 range in the short term.
For a bullish revival, the EUR/USD needs to surpass the 1.1749 level. If this barrier is cleared, the next resistance would be at 1.1800, with a peak of 1.1829 noted earlier this year. In the meantime, the 20-day SMA will act as support at 1.1663, and a decisive break could lead to challenges at 1.1600 and then the 50-day SMA at 1.1464.
