EUR/USD Surge & Fiscal Forecasts
Euro’s Recent Upswing
Just last week the EUR/USD pair vaulted to a new high, nudging past 1.0770—its best climb in more than two weeks. But as we rolled into Tuesday, the momentum sputtered and it slipped below 1.0750. The euro remains in a shy decline, thanks to the looming drop in June’s preliminary Eurozone Consumer Price Index (CPI).
Inflation Insights
- Annual CPI slowed to 2.5%, beating expectations.
- The core inflation line stayed steady—service prices are holding their own.
- Service inflation ticked up to 4.1% in May, keeping price pressures alive.
Overall, these readings don’t give us a clear compass on where price pressures are headed.
ECB & Fed Decisions
Yesterday’s German CPI preview for June saw price pressures dip more than expected, giving the European Central Bank (ECB) a green light for future rate cuts. Yet officials kept the exact path fuzzy, wary that a knee‑jerk easing could fan the flames of inflation.
ECB President Christine Lagarde shared at the ECB Forum on Central Banking:
“It will take some time to gather enough data to ensure that above‑target inflation risks have subsided.”
“The strong labour market means we can wait longer to gather new information.”
Meanwhile, the upcoming French elections on July 7 adds another layer of uncertainty. Polls suggest Marine Le Pen’s National Rally is comfortably placed, albeit with a slimmer margin than some had predicted.
On the U.S. side, the US Dollar Index (DXY) rocketed up, nearing the 106.00 mark. Investors are hungry for clues on when the Federal Reserve might start trimming rates this year. That’s why most eyes will be glued to Jerome Powell’s speech scheduled for today.
Market Outlook
Financial pundits are leaning toward a Fed rate cut beginning at the September meeting—potentially twice this year, vs. the single cut forecasted by Fed insiders.
In addition to Powell’s remarks, the May job openings data will be released. Economists anticipate about 7.9 million openings, a slight dip from April’s 8.06 million.
What bodes for the EUR/USD? If Powell acknowledges improved inflation, the U.S. dollar could feel a pinch. That, combined with Lagarde’s cautious stance, might see the pair trend downward during today’s American session.
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