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- EUR/USD fell below the 1.0700 level as the Federal Reserve maintains tight guidance on interest rates.
- Fed’s Bowman doesn’t expect to cut interest rates this year.
- Investors will focus on core personal consumption expenditures data in the US and preliminary inflation data for major euro zone economies this week.
The EUR/USD pair fell below the full support level at 1.0700 in the early US session on Wednesday. The major currency pair remains in decline as the euro’s near-term outlook weakens amid uncertainty over the EU legislative elections and growing speculation that… European Central Bank (ECB) This could lead to subsequent cuts in interest rates.
The fears are over Euro-zone The intensity of the elections intensified after French President Emmanuel Macron called for early elections after his party suffered defeat in the initial results from the far-right National Rally party led by Marine Le Pen. The euro may face further pressure if the shared continent sees a major shift in policy.
Meanwhile, expectations for the European Central Bank to make successive interest rate cuts have improved as the German outlook improves Economic forecasts It appears to be exacerbated by weak demand forecasts. Data on Monday showed that Germany’s Ifo forecast index unexpectedly fell to 89.0 from an estimate of 91.0 and the previous release of 90.3 (revised down from 90.4). Regarding the release of the data, IFO President Clemens Fuest said: “The German economy is having difficulty overcoming the recession.”
this weekInvestors will focus on preliminary inflation data for June in Spain, France and Italy, which will be published on Friday.
Daily summary of market drivers: EUR/USD declines as the US dollar advances
- The EUR/USD pair is under pressure as the US dollar (USD) advances due to hawkish guidance on interest rates by policymakers at the Federal Reserve (Fed), who continue to argue in favor of maintaining the current interest rate framework because they want to see a decline in interest rates. Benefit. inflation for several months before considering lowering interest rates. The US Dollar Index (DXY), which tracks the value of the US currency against six major currencies, jumps to a crucial resistance level at 106.00. US inflation fell more than expected in May, however, officials expect that a one-time decline in price pressures will not be enough to make interest rate cuts appropriate.
- On Tuesday, Federal Reserve Governor Michelle Bowman provided hawkish guidance on interest rates. Bowman said they have not reached a point where lowering interest rates is appropriate. It postponed expectations for interest rate cuts to 2025 and warned of further increases if the decline in inflation appears to have stopped or reversed.
- In contrast to the Fed’s hawkish outlook on interest rates, investors expect two rate cuts this year, and the policy easing process will begin at the September meeting. For further signals on the outlook for interest rates, investors are awaiting May core PCE price index data, which will be published on Friday.
- According to estimates, the PCE inflation report will show that price pressures grew at a slower pace of 0.1% on a monthly basis than the previous release of 0.2%. On an annual basis, core inflation is expected to rise modestly to 2.6% from 2.8% in April. Weak inflation data would boost expectations of a Fed rate cut in September, while hotter-than-expected numbers would dampen them.
Today’s US dollar price:
US dollar price today
The table below shows the percentage change in the US Dollar (USD) against the major currencies listed today. The US dollar was the strongest against the Japanese yen.
| American dollar | euro | GBP | JPY | scoundrel | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| American dollar | 0.26% | 0.24% | 0.43% | 0.21% | -0.17% | 0.41% | 0.21% | |
| euro | -0.26% | -0.02% | 0.14% | -0.07% | -0.43% | 0.17% | -0.07% | |
| GBP | -0.24% | 0.02% | 0.18% | -0.05% | -0.41% | 0.21% | -0.03% | |
| JPY | -0.43% | -0.14% | -0.18% | -0.22% | -0.60% | 0.01% | -0.22% | |
| Bastard – scoundrel | -0.21% | 0.07% | 0.05% | 0.22% | -0.41% | 0.22% | -0.01% | |
| Australian dollar | 0.17% | 0.43% | 0.41% | 0.60% | 0.41% | 0.60% | 0.37% | |
| New Zealand dollar | -0.41% | -0.17% | -0.21% | -0.01% | -0.22% | -0.60% | -0.22% | |
| Swiss Franc | -0.21% | 0.07% | 0.03% | 0.22% | 0.00% | -0.37% | 0.22% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select USD from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Technical Analysis: The EUR/USD pair is declining towards the border of the triangle sloping upward
EUR/USD It falls slightly below the crucial support level at 1.0700. The major currency pair is facing selling pressure near the sloping border of the symmetrical triangle on the daily chart near 1.0750, which was drawn from the December 28, 2023 high around 1.1140. The pair is trading below the 50-day Exponential Moving Average (EMA), indicating that the short-term outlook is bearish.
The 14-period RSI is hovering near the 40.00 level. Downward momentum could occur if the oscillator falls below this level.
Federal Reserve Bank Questions and Answers
Monetary policy in the United States is shaped by the Federal Reserve Bank (Fed). The Federal Reserve has two missions: achieving price stability and promoting full employment. The primary tool for achieving these goals is adjusting interest rates. When prices rise too quickly and inflation is above the Fed’s 2% target, it raises interest rates, which increases borrowing costs throughout the economy. This causes the US dollar (USD) to strengthen because it makes the United States a more attractive place for international investors to park their money. When inflation falls below 2% or when the unemployment rate is very high, the Fed may lower interest rates to encourage borrowing, which affects the dollar.
The Federal Reserve holds eight monetary policy meetings annually, where the Federal Open Market Committee assesses economic conditions and makes monetary policy decisions. Twelve Fed officials attend FOMC meetings – the seven members of the Board of Governors, the president of the New York Fed, and four of the remaining 11 regional reserve bank presidents, who hold their positions for one year on a rotating basis.
In extreme cases, the Fed may resort to a policy called quantitative easing (QE). QE is the process by which the Fed dramatically increases the flow of credit into a stuck financial system. It is a non-standard policy measure used during crises or when inflation is very low. It was the Fed’s weapon of choice during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy high-quality bonds from financial institutions. QE typically weakens the U.S. dollar.
Quantitative tightening (QT) is the reverse process of quantitative easing, where the Fed stops purchasing bonds from financial institutions and does not reinvest capital from bonds it holds outstanding, to purchase new bonds. This is usually positive for the value of the US dollar.
