Euro makes a U-turn and breaks below 1.1000.

Euro halts the positive streak vs. the US Dollar on Tuesday.

Stocks in Europe trade mostly with gains on Tuesday.EUR/USD comes under pressure as risk sentiment sours.The Euro (EUR) reverses initial gains and drops to daily lows near 1.0980 vs. the US Dollar (USD) on turnaround Tuesday. Indeed, EUR/USD faces rising selling pressure on the back of the pick-up in the risk-off sentiment as well as the rebound in the US Dollar (USD) to the 102.00 neighbourhood after its earlier move to new 2-month lows in the 101.70/65 band.

The FX universe continues to correct lower on the back of the now diminishing appetite for the risk complex, all against the backdrop of a tepid bounce in US and German yields. Despite this, recent strong results from key US fundamentals indicate a resilient US economy and a tight labor market, reinforcing the likelihood of a 25 basis point rate hike by the Federal Reserve at its July 26 gathering. Similarly, a 25 bps rate raise is anticipated at the European Central Bank’s (ECB) meeting later in the month.

Francois Villeroy, a Board member of the ECB, suggests that food inflation should lose traction in the second half of the year and hints that the CPI should average 2.5% in 2024. He also argues that the tightening cycle is approaching its peak, where the bank should remain for a while.

In the meantime, there are increasing concerns about an economic slowdown on both sides of the Atlantic, and discussions continue about the potential future actions of the Fed and ECB in normalizing their monetary policies.In Germany, the final Inflation Rate for June showed the CPI rising 0.3% MoM and 6.4% over the last twelve months, matching the advanced prints.

Additional data in the region saw the Economic Sentiment tracked by the ZEW Institute worsen to -14.7 and -12.2 when it comes to the broader euro bloc for the month of July.In the US, the NFIB Business Optimism Index improved to 91 for the month of June, while the IBD/TIPP Economic Optimism index and the speech from St. Louis Fed James Bullard (2025 voter, hawk) come later.

Daily digest market movers: Euro bumped into a wall near 1.1030.The EUR faces initial resistance at monthly peaks near 1.1030.

Technical Analysis: Euro keeps its attention on the 2023 high

The continuation of the uptrend now targets the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. Further up comes the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1180, just before another round level at 1.1200.

On the downside, the weekly low at 1.0833 (July 6) appears reinforced by the provisional 100-day SMA. The breakdown of this region should meet the next contention area not before the May low of 1.0635 (May 31), which remains propped up by the crucial 200-day SMA (1.0630). South from here emerges the March low of 1.0516 (March 15) prior to the 2023 low of 1.0481 (January 6).Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA, today at 1.0630.

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Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.

If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

EUR/USD drops below 1.1000 as USD rebounds

EUR/USD lost its traction and declined below 1.1000 after having touched at fresh multi-month high above 1.1020. The negative shift witnessed in risk mood helps the US Dollar rebound, making it difficult for the pair to hold its ground.

EUR/USD News

GBP/USD retreat from 15-month highs, trades near 1.2900

GBP/USD staged a downward correction and declined below 1.2900 from the 15-month high it set above 1.2930 in the early European session on Tuesday. The mixed jobs report from the UK and the renewed US Dollar strength doesn’t allow the pair to gather further bullish momentum.

GBP/USD News

Gold clings to modest daily gains above $1,930

Gold price stays in positive territory above $1,930 in the early American session on Tuesday. Ahead of Wednesday’s key US inflation report, the benchmark 10-year US Treasury bond yield is down nearly 1% on the day below 4%, helping XAU/USD keep its footing.