EUR/USD Breaks the 1.0850 Barrier
Friday’s trading scene was a roller‑coaster for the euro. While the U.S. dollar sashayed down to about DXY 104.30, the EUR/USD pair leapt over 1.0850, showing that nothing can keep the euro from living a little louder.
Why the Dollar Took a Beat
- The core PCE index for June came in higher than expected—2.6% year‑on‑year—slightly outpacing the market’s 2.5% forecast.
- Monthly inflation ticked up to 0.2%, beating the previous 0.1% estimate.
- These figures suggested the Fed might hold its snare instead of dropping rates early, which was a bright spot for euro investors.
Fed’s Latest Decision: Rate Stay
The expected Federal Reserve meeting on Wednesday is the next toast to watch. The consensus is that the Fed will keep its 5.25%‑5.50% interest band wide open—no power cuts for now—but traders are bracing for signals that might still be sly.
Euro Zone Ups and Downs
Even though the euro performed well, it has had to navigate some rough seas:
- The German HCOB Composite PMI slipped to 48.7 in July from 50.4, signaling a contraction in private sector activity.
- Government news: Christian Lindner announced a €30 billion tax cut for businesses and households, highlighting the weak demand environment.
- ECB expectations: A second rate cut in September is on the horizon, but ECB officials are cautious, hoping inflation will head back to the 2% target by 2025.
Upcoming Market Junctions
- US payroll data this week could reignite doubts about the U.S. consumer and manufacturing sectors.
- The Harmonised Consumer Price Index (HICP) for the eurozone, dropping in July, might give the ECB a clue on when to cut rates.
- US treasury yields are flirting with a rise, hinting at more volatility.
Takeaway
So, while the euro is still dancing high above 1.0850, the mood remains jittery. A wave of better-than‑expected U.S. GDP data nudged markets, but looming concerns about manufacturing and payroll data keep the ride uncertain. Hold onto your hats—escalator dynamics are about to be repeated again.
