EUR/USD tests 1.1100 ahead of PMIs, Jackson Hole Symposium
|- EUR/USD gains to 1.1100 due to weakness in the US Dollar.
- The US Dollar faces a sell-off amid firm Fed September rate-cut bets.
- ECB Rehn sees market expectations for rate cuts in September as appropriate.
EUR/USD rises to a more than seven-month high near the round-level resistance of 1.1100 in Tuesday’s New York session. The major currency pair gains as the US Dollar (USD) continues to face a sheer sell-off, weighed by firm expectations that the Federal Reserve (Fed) will begin cutting interest rates in September.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near a seven-month low at around 101.80. Market speculation for Fed interest rate cuts has strengthened as officials seem to be more worried about the United States (US) labor market and remain confident that price pressures are on track to the 2% target.
On Monday, Minneapolis Fed Bank President Neel Kashkari cited concerns over signs of weakening labor market conditions and favored rate cuts in September. “The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have,” he said in an interview with The Wall Street Journal.
“If we saw some quicker deterioration in the labor market, then that would tell me, ‘well, we need to do more, quickly, to support the labor market, even if we have uncertainty about where our ultimate destination is going to be,” he added. However, Kashari pushed back expectations of the Fed’s jumbo rate cuts citing that layoffs remain low and higher jobless claims are not a sign of labor market deterioration.
For more cues on the interest rate path, investors will focus on the release of the Federal Open Market Committee (FOMC) minutes for the July meeting on Wednesday, and the Fed Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium, which will be held from August 22 to 24.
Daily digest market movers: EUR/USD gains with Eurozone/US PMIs in focus
- EUR/USD exhibits strength amid weakness in the US Dollar. The Euro (EUR) outperforms the Greenback but is sluggish against other peers on expectations that the European Central Bank (ECB) could cut interest rates two more times this year. The ECB is widely anticipated to cut interest rates for the second time in its September meeting.
- This week, investors will focus on the preliminary Eurozone HCOB Purchasing Managers’ Index (PMI) data for August and Q2 Negotiated Wage Rates, which will be published on Thursday. Economists estimate that the Composite PMI barely improved amid the contraction in activities in the manufacturing sector. As for the Negotiated Wage Rate, a key measure of wage growth rose to 4.69% in the first quarter of this year and ECB officials would be pleased with a lower reading for the second quarter.
- The economic outlook of the Eurozone is vulnerable as its largest economy, Germany, struggles to maintain a firm footing due to poor demand from domestic and overseas markets. Amid downside risks to the Eurozone economic outlook, ECB policymaker and Finnish central bank chief Olli Rehn has shown comfort for market expectations pointing to rate cuts in September.
- In a speech to the European American Chamber of Commerce in New York, Rehn said: "The recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September, provided that disinflation is indeed on track," Reuters reported.
Euro Price Today:
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | -0.05% | -0.15% | -0.15% | -0.16% | -0.05% | -0.49% | -0.38% | |
| USD | 0.05% | -0.09% | -0.09% | -0.12% | -0.01% | -0.74% | -0.32% | |
| GBP | 0.15% | 0.09% | 0.00% | -0.01% | 0.11% | -0.35% | -0.25% | |
| JPY | 0.15% | 0.09% | 0.00% | -0.02% | 0.07% | -0.37% | -0.27% | |
| CAD | 0.16% | 0.12% | 0.00% | 0.02% | 0.09% | -0.32% | -0.25% | |
| AUD | 0.05% | 0.01% | -0.11% | -0.07% | -0.09% | -0.43% | -0.38% | |
| NZD | 0.49% | 0.74% | 0.35% | 0.37% | 0.32% | 0.43% | 0.08% | |
| CHF | 0.38% | 0.32% | 0.25% | 0.27% | 0.25% | 0.38% | -0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical Analysis: EUR/USD revisits 1.1100
EUR/USD turns sideways after rising to a fresh seven-month high near the round-level resistance of 1.1100. The major currency pair strengthened after a breakout of a channel formation on a daily time frame. Upward-sloping 20-day and 50-day Exponential Moving Averages (EMAs) near 1.0945 and 1.0880, respectively, suggest that the overall trend is bullish.
The 14-day Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum.
The immediate resistance for the Euro bulls would be the 28 December 2023 high at 1.1140. On the downside, the August 15 low at 1.0950 will be a key support area.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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