EUR/USD Surges on Fed’s Shocking July Cut Hint—Is This the Market’s Game-Changer You’ve Been Waiting For?
Next week, the EU’s economic docket will feature Consumer Confidence, Flash PMIs for July and the European Central Bank (ECB) monetary policy decision. Across the pond, the US schedule will announce US housing data, S&P Global Flash PMIs, Initial Jobless Claims and Durable Goods Orders.
Daily digest market movers: EUR/USD reclaims 1.1600 despite strong US data
- The University of Michigan’s preliminary Consumer Sentiment Index rose to 61.8 in July, up from 60.7 in June and slightly above the expected reading of 61.5. Joanne Hsu, the director of the survey, said, “Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example, if trade policy stabilizes for the foreseeable future.”
- The University of Michigan survey also showed a decline in inflation expectations. Long-term inflation (5-year outlook) was revised down to 3.6% from 4%, while one-year expectations dropped to 4.4% from the previous 5%.
- Separately, Fed Governor Christopher Waller acknowledged that while the labor market remains stable overall, conditions in the private sector are less robust. Although he expressed support for a potential rate cut in July, he emphasized that he would not commit ahead of the meeting, stating he prefers to “hear all sides” before making a final decision.
- Chicago’s Fed Austal Goolsbee said that the new round of tariffs doesn’t help to fight inflation, so they (the Fed) could understand the impact on prices. Although he favors rate cuts, he said they have to wait longer to adjust policy if price pressures pick up.
- Recent US economic data painted a mixed picture of inflation. While the Consumer Price Index (CPI) edged closer to the 3% mark, the Producer Price Index (PPI) showed signs of easing. However, stronger-than-expected Retail Sales suggested that much of the increase was driven by higher prices linked to newly imposed tariffs, rather than underlying demand.
- Since last week, several ECB policymakers have voiced their views on the monetary policy outlook. Mario Centeno joined De Guindos, Vujčić, and Villeroy in signaling support for a pause or potential rate cut. Fabio Panetta also backed easing, citing increasing downside risks to growth.
- In contrast, Isabel Schnabel argued that current rates are appropriately positioned, advocating for a hold—an opinion echoed by Robert Holzmann, who emphasized the need to wait for more data before making any adjustments.
EUR/USD technical outlook: Consolidates within the 20 and 50-day SMA, above 1.1600
The EUR/USD is trading sideways, despite being upward biased from a market structure perspective. However, the Relative Strength Index (RSI) indicates bearishness, suggesting that neither buyers nor sellers are in control.
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