EUR/USD: A Cautious Comeback
This Friday, the euro nudged past its recent losses, trading around 1.10764. The move feels like a tentative comeback, but everybody’s eyes are still on the horizon.
Why the hesitation?
- Eurozone’s HICP – The July Harmonized Index of Consumer Prices is on the radar. If inflation looks nice and tidy, the ECB might lean toward cutting rates.
- U.S. GDP surprise – A booming 3.0% Q2 growth has buoyed the dollar and dampened hopes of a significant Fed rate cut in September.
- European CPI chatter – Germany, Spain and the rest of the bloc have shown a slowdown in August inflation, adding to expectations of tightening.
What the forecasts look like
Right now, market sentiment points toward a September Fed cut, in line with global easing trends once the inflation threat fades.
The 10‑year U.S. Treasury yield sits at 3.82%, stabilising after a dip. It’s skating around the 3.84% 50‑day moving average. If it stays below, we’re looking at lower future rates and a softer dollar.
Why this matters for the pair
When the U.S. yields are low, international investors flock away from the dollar; that can lull the euro. But the euro is still under pressure from the ECB’s cautious stance, especially as service‑sector inflation hangs around.
Bottom line
The pair is likely to stay in a tight hallway, trading a narrow corridor until the data comes in. Investors will keep their fingers on the pulse, waiting for clearer signals before they commit to a big move.
Tip: Keep an eye on today’s Eurozone CPI release—expecting a drop to around 2.2%—and watch how the ECB might react. A job‑growth surge could keep the euro on a tighter watch, while significant wage hikes might push the ECB to hold off on rate cuts.
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