Euro sinks to weekly lows near 1.0870 on firm US data.

Euro quickly leaves behind the earlier bullish atempt vs. the US Dollar.

Stocks in Europe en route to close the session with decent gains.EUR/USD loses the grip and retreats to the 1.0870/65 band.Flash inflation figures in Germany surprised to the upside.

Firmer-than-expected US Q1 GDP, weekly Claims prop up the Greenback.

Chief Powell suggested that more job needs to be done regarding inflation.

The Euro (EUR) now rapidly gives away the earlier optimism and forces EUR/USD to once again break below the 1.0900 hurdle and slip back to the 1.0870 region, or weekly lows, on Thursday.

Indeed, the pair makes another U-turn, this time to the downside, as better-than-estimated results from US fundamentals lend unexpected legs to the Greenback and lift the USD Index (DXY) to new 2-week peaks near 103.40.

The now sour sentiment in the risk complex comes after central bank chiefs expressed hawkish sentiments at the ECB Forum in Portugal on Wednesday, highlighting that current policy measures are still not adequately restrictive. Despite this, the market appears to be at ease with the belief that the Federal Reserve (Fed) will implement two additional interest rate hikes, potentially back-to-back, signalling the nearing conclusion of the tightening cycle.

Likewise, although the European Central Bank (ECB) holds a hawkish stance and plans to raise rates in July, and potentially once more thereafter, concerns arise due to the economic decline and credit data, which restrict expectations regarding the extent and duration of the ECB’s policy rate increases.

The potential future actions of the Fed and the ECB in normalizing their monetary policies remain a topic of ongoing debate. This discussion takes place against the backdrop of increasing speculation about an economic slowdown on both sides of the Atlantic.

In the domestic calendar, advanced inflation figures in Spain expect the CPI to rise 1.9% in June, while the Economic Sentiment and the final print of the Consumer Confidence in the broader euro area eased to 95.3 and held steady at -16.1, respectively, in June. Finally, preliminary inflation figures in Germany see the CPI rising 6.4% in June vs. the same month of 2022.

In the US, the final prints of the Q1 Growth Rate showed the economy expanded 2.0% vs. a 1.4% expansion projected and Initial Jobless Claims increased by 239K in the week to June 24. Later in the session, Pending Home Sales and the speech by Atlanta Fed Raphael Bostic (2024 voter, hawk) will complete the daily docket.

Daily digest market movers: Euro remains at the mercy of USD dynamics.The Euro weakens on the back of further strength in USD.

Germany’s flash CPI for the month of June surpasses consensus.The European Council meets in Brussels.

Fed’s Powell said there is still job to do regarding US inflation.The US Dollar reclaims further ground on the back of solid data.ECB’s Mario Centeno (dove) suggested a pause should be close.

Atlanta Fed Raphael Bostic advocated for some pause to assess the impact of policy so far.Technical Analysis: Euro could revisit the 1.0840 region.

EUR/USD remains under pressure and retreats to new weekly lows in the 1.0870/65 band on Thursday. The loss of this region exposes a deeper pullback to the June low at 1.0844 (June 23) ahead of the provisional 100-day SMA at 1.0815. South from here emerges the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

If bulls regains the upper hand, the next hurdle is then expected at the June peak of 1.1012 (June 22) prior to the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. North from here emerges the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1181, just before another round level at 1.1200.

The constructive view of EUR/USD appears unchanged as long as the pair trades above the crucial 200-day SMA, today at 1.0583.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.

EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

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