EUR/USD is currently in a consolidation phase as investors await the release of the US core PCE Price Index for June. The annual US core PCE inflation is expected to have slowed down to 2.5%, which could impact market expectations for Federal Reserve rate cuts. This data is crucial as it will influence the outlook on interest rates by the Fed in its upcoming monetary policy meeting.
The Euro has been facing challenges due to various headwinds, with Germany’s economic prospects taking a hit. The recent contraction in the Flash German HCOB Composite Purchasing Managers Index (PMI) for July has raised concerns. Dr. Cyrus de la Rubia, Chief Economist at HCOB, highlighted the decline in private sector business activity, especially in manufacturing output, which is dragging Germany’s economy into contraction territory.
Moreover, the Euro’s outlook remains uncertain as expectations of further rate cuts by the European Central Bank (ECB) persist. Some ECB policymakers are speculating about the need for two more rate cuts to stimulate the economy. The recent tax relief announcement by the German government indicates concerns over weak demand conditions.
Looking ahead, the focus will be on the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data for July, which will provide insights into the ECB’s potential interest rate cuts. Traders are anticipating the ECB to resume its policy-easing cycle in September.
In terms of technical analysis, EUR/USD is holding above key support levels but remains within a Symmetrical Triangle pattern on a daily timeframe. The currency pair is currently below the 20-day Exponential Moving Average (EMA), indicating a downside potential towards round-level supports near 1.0800 and 1.0700.
Overall, the market sentiment is cautious as investors await the US core PCE Price Index data, which will likely set the tone for future interest rate decisions by the Fed. The Eurozone’s economic challenges and the ECB’s policy outlook will continue to influence the Euro’s performance in the coming weeks.