EUR/USD has seen a rise to 1.0720 as the US core PCE price index data showed a decline in price pressures in May. This decline in inflation data is expected to positively influence speculation on the Fed reducing interest rates from the September meeting, with the CME FedWatch tool indicating the possibility of two rate cuts this year. Despite this, Fed officials see only one rate cut this year. Atlanta Fed Bank President Raphael Bostic mentioned that rate cuts would be appropriate when inflation is on a clear path towards 2%, with a potential cut in the federal funds rate in the fourth quarter of this year.
The US Dollar Index (DXY) has fallen to 105.80, with 10-year US Treasury yields declining to 4.27%. The major trigger for the USD will be the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for June, set to be published on Monday, which will indicate the health of the manufacturing sector. The Euro’s outlook remains uncertain ahead of the French elections and the Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for June, as investors are worried about potential spending plans impacting the budget crisis. The victory of the far-right National Rally in France is not guaranteed due to the formation of the French left.
Investors are eagerly awaiting the Eurozone preliminary HICP data for clues on further rate cuts by the European Central Bank (ECB). The ECB has already begun its rate-cut cycle, reducing key rates by 25 basis points in early June. Price pressures are declining in major Eurozone nations, fueling speculation on more rate cuts by the ECB. The annual Consumer Price Index (CPI) in France declined to 2.5% from the previous release of 2.6%, while annual HICP in Spain decelerated to 3.5% and price pressures in Italy were mixed. The uncertainty in the Eurozone adds to the Euro’s uncertain outlook in the near term.
EUR/USD remains close to 1.0700 as the US Dollar corrects, with the Euro facing uncertainty ahead of key Eurozone events. The French elections outcome and the Eurozone preliminary HICP data for June are key factors impacting the Euro’s outlook. The formation of a new government in France and potential spending plans could deepen the budget crisis. ECB rate cuts following the HICP data will provide further insights into the Euro’s trajectory in the coming months. The victory of the National Rally in France remains uncertain due to the presence of the French left, creating an added layer of unpredictability.
In technical analysis, EUR/USD is looking to establish a firm footing above 1.0700, trading within a Symmetrical Triangle pattern. The shared currency pair is below the 200-day Exponential Moving Average (EMA), indicating a bearish trend. The 14-period Relative Strength Index (RSI) is near 40.00, suggesting the potential for a bearish momentum if the oscillator slips below this level. Investors are closely monitoring the US core PCE inflation reading to make informed trading decisions.
The Harmonized Index of Consumer Prices (HICP) is a crucial economic indicator that measures changes in the prices of goods and services in the European Monetary Union. The HICP, released by Eurostat monthly, provides a comparison of prices in the reference month to a year earlier. A high reading is seen as bullish for the Euro, while a low reading is viewed as bearish. The upcoming Eurozone preliminary HICP data for June will be closely watched for its impact on the ECB’s rate cuts and the Euro’s performance in the market.
