- EUR/USD eked out gains on Tuesday despite the political uncertainty in Italy.
- Tuesday's gains could be short-lived if the prospects of snap Italian elections rise.
- Dovish Fed minutes needed to push EUR/USD higher to 1.1150.
EUR/USD rose 0.19% on Tuesday, ending the five-day losing streak. Tuesday's gains, however, could be erased if the Italian yields rise due to political uncertainty and the Federal Reserve minutes validate Chairman Powell's reluctance to cut rates aggressively.
Italy's government collapsed on Tuesday, pushing the key European nation into a renewed period of crisis and uncertainty. Even so, the 10-year Italian government bond yield fell by more than five basis points.
The bond markets' response indicates the investors believe the political crisis would be resolved soon potentially paving the way for a new coalition government.
Italian President Sergio Mattarella will begin two days of talks with parties today to seek a way out of a political crisis.
Italian yields will likely rise in the EUR-negative manner if talks begin on a negative note, forcing markets to price in snap elections.
Focus on Fed minutes
The U.S. Federal Reserve will release the minutes from the July Federal Open Market Committee (FOMC) meeting at 18:00 GMT today.
The Fed cut rates by 25 basis points as expected on July 31, but Chairman Powell refrained from signaling more easing.
The US Dollar will likely pick up a bid if the minutes validate Powell's reluctance in starting a rate-cutting cycle.
EUR/USD could rise to 1.1150 if the minutes reflect the market’s concerns about global slowdown having a negative impact on the US economy. That would boost the odds of a September rate cut.
As of writing, EUR/USD is trading at 1.1095, having hit a high of 1.1105 earlier today. Meanwhile, the 10-year Italian government bond yield is at 1.36%.
- FOMC Minutes July 30-31 Meeting Preview: The Fed vs the markets
- EUR/USD technical analysis: Ends five-day losing streak, but bias remains bearish
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.