Euro Set for Gains as Attention Shifts to US CPI Data
- The euro is expected to rebound, recovering some earlier losses, as the focus turns to the US Consumer Price Index (CPI) report.
- Trade agreements between the EU and US, along with positive data from China, help to ease market anxieties.
- The EUR/USD pair might face tough resistance around the 1.1700 mark.
The EUR/USD pair’s performance saw the European Union snapping its four-day winning run on Tuesday. The US is still on the lookout for agreements to sidestep the 30% tariffs set by President Trump, which adds to the anticipation surrounding the CPI release later in the day.
The euro (EUR) has bounced back from a three-week low of 1.1655 reached on Monday, but it remains below the critical 1.1700 level. Over a longer time frame, this pair is stuck in a downtrend channel, retreating from its recent peak of almost 1.1830 from July 1.
Market sentiment has slightly improved, thanks in part to ongoing negotiations with the US. President Trump, in a Monday interview with White House journalists, expressed motivation to engage further with EU officials ahead of their upcoming visit to the US.
The dollar (USD) is showing some signs of weakness while investors are cautious about taking on larger dollar positions ahead of the critical inflation data. The June CPI could provide insights on tariffs’ impact and the next steps for the Federal Reserve’s monetary policy. Any deviation from what the market expects might significantly influence how the dollar is trading.
Moreover, President Trump isn’t holding back his pressure on the Fed. He recently referred to Chairman Jerome Powell in less than flattering terms, suggesting that inflation isn’t a pressing issue and advocating for interest rate cuts to 1%, down from the current range of 4.25%-4.50%. Such remarks likely intensify if consumer inflation numbers fall short of expectations.
Today’s Euro Pricing Update
The euro has displayed strength against the US dollar compared to other major currencies. Below are the recent changes:
| Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.05% | -0.06% | -0.09% | -0.08% | -0.10% | -0.29% | |
| EUR | 0.17% | 0.06% | 0.09% | 0.07% | 0.05% | 0.01% | -0.11% | |
| GBP | 0.05% | -0.06% | 0.00% | 0.00% | -0.04% | -0.08% | -0.02% | |
| JPY | 0.06% | -0.09% | 0.00% | -0.04% | -0.00% | -0.09% | -0.14% | |
| CAD | 0.09% | -0.07% | -0.00% | 0.04% | 0.02% | -0.08% | -0.02% | |
| AUD | 0.08% | -0.05% | 0.04% | 0.00% | -0.02% | -0.05% | -0.03% | |
| NZD | 0.10% | -0.01% | 0.08% | 0.09% | 0.08% | 0.05% | 0.06% | |
| CHF | 0.29% | 0.11% | 0.02% | 0.14% | 0.02% | 0.03% | -0.06% |
This table represents the recent price fluctuations across various currencies, highlighting the euro’s strength against the US dollar among others.
Market Insights: US Dollar Slips Ahead of CPI Release
- Forecasts suggest that U.S. consumer prices could rise from 2.4% in May to 2.7% in June year-on-year, while the core CPI—excluding volatile food and energy costs—might increase from 2.8% to 3% during the same period.
- President Trump has referred to Federal Reserve Chair Powell in derogatory terms, emphasizing his belief that inflation isn’t an immediate worry and expressing support for interest rate cuts to 1% from the current 4.25%-4.50% range, particularly if inflation data falls below expectations.
- Additionally, information from China shows the economy grew at a 5.2% rate in the second quarter, which outperformed the anticipated 5.1% and reflects surprising resilience against US tariffs—helping to buoy market sentiment.
- In the Eurozone, the German ZEW survey is likely to indicate slight improvements in investor sentiment, though it still reflects a generally weak economic outlook.
- Eurostat is set to release industrial production figures for May, anticipated to show a monthly growth of 0.9% after a 2.4% decrease in April.
EUR/USD Recovering from Lows, Capping Rally at 1.1700
The EUR/USD continues trading within its downward channel since the July 1 highs. After bouncing off recent lows, its upward potential appears somewhat constrained while awaiting clarity on trade dynamics between EU and US. Also, technical indicators on the 4-hour chart suggest bearish tendencies, with the RSI remaining below 50.
The bears struggled to break the 1.1660 support zone, but attempts to rise above 1.1700 have been limited. Should the bearish trend continue below 1.1660, support could be found near the 50% Fibonacci retracement around 1.1640, derived from the late June rally.
The primary resistance lies around 1.1700, coinciding with the channel’s upper boundary at approximately 1.1710. If this area is breached, the next focal point might be the July 10 high at 1.1750.
