- EUR/USD recovers to 1.0830 after soft US Inflation report.
- Soft US CPI data has boosted Fed rate-cut expectations for the September meeting.
- ECB policymakers refrain from providing a specific interest-rate path.
EUR/USD jumps swiftly above the round-level resistance of 1.0800 in Wednesday’s New York session. The major currency pair strengthens after the United States (US) Consumer Price Index (CPI) report for May turned out to be softer than expected. This has boosted market speculation for the Federal Reserve (Fed) to start reducing interest rates from the September meeting. The CME FedWatch tool shows that the probability of the Fed cutting rates from September jumps to 55.4% from below 50% after the release of the CPI report.
US annual core inflation, which strips off volatile food and energy prices, decelerated to 3.4 from the estimates of 3.5% and April’s reading of 3.6%. In the same period, headline inflation grew at a slower pace of 3.3% against expectations and the prior release of 3.4%. Monthly headline CPI turned out to be stagnant while investors forecasted a nominal increase of 0.l%. The core inflation rose by 0.2%, slower than estimates and the former reading of 0.3%.
A higher-than-expected decline in US inflation data weighs heavily on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, tumbles to near 104.50. 10-year US Treasury yields plunge below 4.30%.
Meanwhile, investors await the Federal Reserve’s (Fed) interest rate decision, which is scheduled for the late American session. Investors will pay close attention to US inflation data and the Fed’s dot plot, as it is widely expected that the central bank will leave interest rates unchanged in the range of 5.25%-5.50% for the seventh time in a row. The Fed’s dot plot indicates where policymakers see the federal funds rate heading in the medium and long-term time frames.
Currently, financial markets lean towards the Fed's decision to begin cutting interest rates at the September meeting after the inflation data. Earlier, traders pared their Fed rate-cut bets for September after the May US Nonfarm Payrolls (NFP) report indicated robust job demand and strong wage growth, which suggested a stubborn inflation outlook.
The new projections for the number of rate cuts are expected to show fewer rate cuts compared to the three predicted In March’s dot plot as officials lose confidence over progress in the disinflation process.
Daily digest market movers: EUR/USD surges as US Dollar plummets
- EUR/USD climbs above 1.0800 as the US Dollar has been hit hard due to a soft US inflation report for May. However, the Euro remains vulnerable against other currencies due to uncertainty surrounding the French elections. Political stability in the Eurozone shaked after French President Emmanuel Macron’s decision to call for a snap election after suffering a defeat by Jordan Bardella-led far-right National Rally, popularly known as Rassemblement National (RN).
- Exit polls on Monday showed that the RN party could win 235 to 265 seats, still short of the 289 needed for an absolute majority, Reuters reported. Analysts see Macron’s decision to call a snap election as a gamble that could further weaken the position of the Centralist alliance.
- Meanwhile, uncertainty over the European Central Bank’s (ECB) interest-rate path appears to be waning as policymakers are holding themselves back from committing to any specific rate-cut trajectory. ECB officials worry that inflation could remain sticky in the next few months due to steady wage growth, which fuels service inflation. In May, Eurozone service inflation rose to 4.1%, the highest in seven months.
- ECB policymaker and Governor of the French central bank Francois Villeroy de Galhau said on Tuesday that he is confident that price pressures will return to its 2% target next year but they have to pass through some bumps in monthly data. "This 'noise' is not very meaningful, and hence we are still more 'outlook driven' and will look still more closely at the inflation forecast,” Villeroy added, according to Reuters.
EUR/USD 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 | 0.95% | 0.09% | 0.12% | 0.38% | -0.44% | -0.27% | 0.25% | |
| USD | -0.95% | -0.88% | -0.81% | -0.54% | -1.37% | -1.23% | -0.72% | |
| GBP | -0.09% | 0.88% | 0.06% | 0.32% | -0.50% | -0.33% | 0.16% | |
| JPY | -0.12% | 0.81% | -0.06% | 0.24% | -0.58% | -0.43% | 0.08% | |
| CAD | -0.38% | 0.54% | -0.32% | -0.24% | -0.82% | -0.65% | -0.18% | |
| AUD | 0.44% | 1.37% | 0.50% | 0.58% | 0.82% | 0.17% | 0.68% | |
| NZD | 0.27% | 1.23% | 0.33% | 0.43% | 0.65% | -0.17% | 0.50% | |
| CHF | -0.25% | 0.72% | -0.16% | -0.08% | 0.18% | -0.68% | -0.50% |
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 breaks above triangle formation
EUR/USD delivers V-shape recovery after sliding to an almost five-week low near 1.0710. The near-term outlook of the major currency pair improves as it rises above the Symmetrical Triangle chart formation on a daily time frame. The shared currency pair approaches a two-month high near 1.0900.
The long-term outlook of the shared currency pair has turned positive after rebounding above the 200-day Exponential Moving Average (EMA), which trades around 1.0800.
The 14-period Relative Strength Index (RSI) finds a cushion near 40.00 and is expected to remain sideways.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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 extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.