- The US dollar is seeing strong support from the workforce and retail sectors, while Trump addresses rumors about firing Powell, easing market concerns.
- Recent unemployment claims and retail sales could exceed forecasts, boosting the dollar’s value.
- Officials from the Federal Reserve are exercising caution regarding interest rate cuts, pointing to inflation and uncertainties brought on by tariffs.
- The euro is facing challenges as inflation in the Eurozone remains close to its target, contrasting with the rising consumer prices in the US.
The EUR/USD pair dropped by 0.38% during the North American trading session following the release of US economic data, bringing the exchange rate to around 1.1598 after peaking at 1.1642.
Risk sentiment improved as President Trump dismissed speculation about dismissing Federal Reserve Chairman Powell. Economic indicators from the US lend credibility to the Fed’s current approach, particularly as the labor market remains strong. However, the Consumer Price Index (CPI) report released showed inflation rising to 3% in June.
Before the markets opened, unemployment claims for the previous week were lower than expected. Retail sales for June also exceeded predictions and significantly outperformed the figures from May, though rising prices of goods may be inflating the positive outlook.
Recent comments from Federal Reserve officials, including Governor Adriana Kugler and San Francisco Fed President Mary Daly, have caught attention. They indicated that the economic outlook is particularly uncertain and highlighted how tariff adjustments complicate future rate cut considerations.
Turning to the Eurozone, inflation reports showed that while prices have increased, they are still near the 2% target, setting a different tone compared to US inflation rates.
This week, key figures from the German Producer Price Index (PPI) stirred the euro, suggesting that the economic landscape continues to evolve. In the US, the University of Michigan consumer sentiment data is highly anticipated, along with forthcoming comments from the Fed.
Daily Digest Market Mover: Euro/USD struggles at 1.1600 amidst strong US data
- Data shows initial unemployment claims for the week ending July 12 decreased from 228K to 221K, coming in below the anticipated 235K. This suggests strength in the labor market, despite concerns over a potential slowdown.
- June retail sales surpassed expectations, rising 0.6% against a forecast of 0.1%, significantly up from the 0.9% recorded in May. Earlier CPI data signaled increasing consumer prices.
- Adriana Kugler expressed a hawkish tone, noting inflation surpassing the 2% target and resilience in the labor market, while warning that CPI inflation is starting to impact core goods.
- Mary Daly highlighted the solid position of the US economy, mentioning the CPI data reflects initial tariff impacts, but overall inflation effects could be limited. She reiterated support for two interest rate cuts in 2025.
- Several ECB policymakers have recently shared their perspectives on monetary policy. Mario Centeno and others have shown support for either a pause or potential reductions in speed. Fabio Panetta expressed concern over increased risks to growth.
- However, Isabelle Schnabel maintained that current rates are appropriate, joined by Robert Holtzmann, who urged for more data before making adjustments.
EUR/USD Technical Outlook: Consolidated within 20 and 50-day SMAs, below 1.1600
The EUR/USD position remains neutral, with traders unable to decisively move above 1.1600 or below 1.1550. The relative strength index (RSI) suggests sellers are gaining momentum.
If the pair drops below 1.1550, the next support lies at 1.1500, followed by the 50-day SMA at 1.1490 and the 100-day SMA at 1.1266. Conversely, a rise above the 20-day SMA at 1.1681 could signal a challenge towards 1.1700, before aiming for the peak of 1.1829 recorded on July 20, ahead of 1.1800.
