- EUR/USD extends the post-Powell rebound to 1.1280.
- ECB will publish its minutes later today.
- US CPI will be the salient event later today in the NA session.
Investors have reversed the prevailing pessimism around the single currency following Powell’s testimony on Wednesday, lifting EUR/USD to as high as the 1.1280 region, or weekly highs, where it seems to have lost some momentum.
EUR/USD now looks to ECB, US CPI
Spot has quickly trimmed its weekly losses after Chief J.Powell’s dovish remarks on Wednesday. In fact, Powell reiterated the Fed will act to sustain the expansion, adding that uncertainties around trade and fears around global growth remain a drag on the outlook, all combined with stagnant inflation.
In line with the FOMC minutes, Powell stressed that the case for lower interest rates has now strengthened, amidst rising market expectations of a 25 bps rate cut later this month (insurance cut).
In Euroland, German final June inflation figures tracked by the CPI came in in line with preliminary prints: up 0.3% MoM and 1.6% over the last twelve months. French CPI, instead, surprised to the upside rising 0.3% inter-month and 1.2% YoY (unchaged).
Later in the day, the ECB will publish the minutes of the latest Governing Council meeting and Board member B.Coeure will give a lecture at the SAFE Policy Center in Frankfurt.
What to look for around EUR
The shared currency is breathing some relief after the dovish tone from Fed’s Powell and the FOMC minutes. However, this is seen as a short-live boost against the backdrop of renewed and increasing speculations of another wave of monetary stimulus from the European Central Bank in the near term, via interest rate cuts (September?) and the resumption of the QE programme. Also weighing on the currency, the dovish stance from the ECB appears reinforced by the recent appointment of ex-IMF’s C.Lagarde to succeed M.Draghi. On the macro scenario, the slowdown in the region looks unremitting and it also reinforces the current accommodative attitude of the central bank.
EUR/USD levels to watch
At the moment, the pair is gaining 0.18% at 1.1271 and a break above 1.1283 (21-day SMA) would target 1.1325 (200-day SMA) en route to 1.1412 (high Jun.25). On the other hand, the next down barrier lines up at 1.1193 (monthly low Jul.9) followed by 1.1181 (low Jun.18) and finally 1.1106 (2019 low May 23).
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