- The ECB rate hike and hawkish remarks by central bank officials have capped the EUR/USD gains.
- US consumer sentiment improves, supporting US dollar appreciation. Inflation in the Eurozone slowed as expected.
- The hawkish stance of both ECB and Fed officials suggests further tightening is possible.
- Upcoming major events include Germany’s May PPI, the EU General Council and US housing market data.
The euro/dollar gains stalled after the European Central Bank (ECB) hiked interest rates, trimming some of the gains from the previous day amid mixed market sentiment. Central bank speakers make the most headlines amid less news, besides inflation in the Eurozone (EU), following decisions by the US Federal Reserve (Fed) and European Central Bank (ECB). ing. At the time of writing, EUR/USD is trading 0.23% lower at 1.0920.
Euro zone inflation slowed as market sentiment was mixed following the central bank’s decision.
Market participant sentiment is mixed, as U.S. stocks show. The US showed improved consumer sentiment, as the latest US economic data (University of Michigan (UoM)) revealed at 68.0 compared to May’s close of 64.9. The data for June was 3.3%, up from 4.2% in May.
EUR/USD fell as a number of comments from US Federal Reserve (Fed) and European Central Bank (ECB) officials leaned towards the hawkish side of monetary policy. The US Dollar (USD) is showing signs of strength as the US Dollar Index (DXY) rose 0.21% to 102.364.
On the eurozone (EU) front, inflation data slowed to 6.1% y/y in May, as expected, down from 7% in April. Meanwhile, two ECB central bank governors, Mario Centeno and Pierre Wanche, made hawkish remarks suggesting the need for more interest rate hikes. Mario Centeno added that there was a “risk of interest rates rising again” if prices did not slow down. “Unless core inflation falls significantly, the ECB could raise interest rates again in September,” said Pierre Wanche.
Across the pond, Fed officials, who were moderates at the FOMC meeting in June, have taken a hawkish stance after the decision. Richmond Fed President Thomas Birkin said he “would be willing to do more” if inflation didn’t recede. Fed Governor Christopher Waller later added that slow inflation “will probably require further tightening.”
EUR/USD regained some of its weekly gains. The stances of the Fed and ECB are under consideration, which could spur EUR/USD consolidation as both central banks move toward a further 50bps tightening.
upcoming events
Eurozone Resources: Germany’s May PPI, EU General Council, June Consumer Confidence Bulletin, Spain’s GDP data to be published, along with S&P Global PMI for Spain, Germany, France, and Eurozone is.
US Economic Agenda: Fed Speakers, Housing Market Data, S&P Global PMI.
EUR/USD Price Analysis: Technical Outlook
From a technical standpoint, EUR/USD is still biased to the upside and will test the 1.1000 number. The daily exponential moving average (EMA) is well below the exchange rate, suggesting further gains are expected. Still, the 3-day rate of change (RoC) shows that buyers are losing momentum and the Relative Strength Index (RSI) indicator remains flat, although it remains in bullish territory. Upside risk is at 1.1000 and the year-to-date high is 1.1095. Conversely, a break below 1.0900 could see the 50-day EMA at 11.0820 prior to the confluence of the 20-day EMA and June’s 15-day low of 1.0803/05.