- EUR/USD drifts lower for the second straight day and drops to a nearly two-week low.
- The ECB’s dovish outlook continues to undermine the Euro and exerts some pressure.
- September Fed rate cut bets cap the USD and should lend support ahead of flash PMIs.
The EUR/USD pair prolongs its recent corrective slide from the vicinity of mid-1.0900s, or a four-month high touched last week, and remains under some selling pressure for the second straight day on Wednesday. This also marks the fourth day of a negative move in the previous five and drags spot prices to a nearly two-week low, around the 1.0840 region during the Asian session.
The shared currency is undermined by the European Central Bank's (ECB) downbeat view of the Eurozone's economic prospects and expectations that inflation would keep falling, which left the door for a rate cut in September wide open. The US Dollar (USD), on the other hand, has strengthened to its highest level since July 11 amid an uptick in the US Treasury bond yields. Apart from this, a softer risk tone benefits the Greenback's relative safe-haven status and contributes to the offered tone surrounding the EUR/USD pair.
Meanwhile, the markets seem convinced that the Federal Reserve (Fed) will lower borrowing costs in September and have been pricing in the possibility of two more rate cuts by year-end. This, in turn, could act as a headwind for the US bond yields and the Greenback. Furthermore, traders could unwind the 'Trump trade' amid increasing chances that US Vice President Kamala Harris will clinch the Democratic nomination. This might further contribute to capping the USD upside and lend some support to the EUR/USD pair.
Traders might also prefer to wait on the sidelines ahead of this week's key US macro data – the release of the Advance Q2 GDP print on Thursday and the Personal Consumption Expenditures (PCE) Price Index data. In the meantime, the flash Eurozone/US PMIs will be looked upon for short-term trading opportunities later this Wednesday. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution before placing aggressive bearish bets around the EUR/USD pair and positioning for further losses.
Economic Indicator
HCOB Composite PMI
The Composite Purchasing Managers’ Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging private-business activity in the Eurozone for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for EUR.
Read more.Next release: Wed Jul 24, 2024 08:00 (Prel)
Frequency: Monthly
Consensus: 51.1
Previous: 50.9
Source: S&P Global
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds firm near 1.1100 ahead of US NFP, Powell
EUR/USD is holding ground near 1.1100 in the early European morning on Friday. Recession fears due to a global trade war lft Fed rate cut expectations, exacerbating the US Dollar's pain while keeping the pair afloat. Traders look to the US NFP report and Fed Chair Powell's speech for fresh directives.
GBP/USD retakes 1.3100 as US NFP data looms
GBP/USD is defending minor bids above 1.3100 in early Europe on Friday. Persistent US Dollar weakness on recession fears and dovish Fed expectations underpin the pair as traders look forward to the US payrolls data and Fed Chair Powell speech for placing fresh bets.
Gold price hovers near $3,100; bullish bias remains ahead of US NFP report
Gold price meets with a fresh supply on Friday, though the downside potential seems limited. Trump’s tariffs-inspired risk-off mood might continue to act as a tailwind for the precious metal. Fed rate cut bets weigh on the USD and should contribute to limiting losses for the XAU/USD pair.
XRP finds new lifeline as Coinbase Derivatives eyes XRP futures on April 21
Ripple price reclaims the $2.00 support level and trades at $2.06 at the time of writing on Friday in the wake of a drawdown to $1.96 during Thursday’s session. Traders continue to exercise caution after Trump’s tariffs hit 100 countries, as per a CryptoQuant report.
Trump’s “Liberation Day” tariffs on the way
United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.