EURUSD is moving in Ascending channel and market has rebounded from the higher low area of the channel
EUR/USD on the Rise: What’s Driving the Euro Higher?
Why EUR/USD is Gaining Momentum
Hey there! If you’ve been keeping an eye on the EUR/USD pair, you’ve probably noticed it’s been on a bit of a winning streak lately. So, what’s driving this uptrend? Well, it’s a mix of political surprises in Europe and some soft economic data in the US. Let’s break it down together.
Surprise Election Results in France
The Leftist Alliance Shakes Things Up
Recently, France’s election results gave everyone quite a jolt. A leftist alliance unexpectedly took the lead, keeping Marine Le Pen’s far-right party out of the leadership race. This shift was the least expected outcome and has raised some eyebrows and concerns, especially about potential increases in public spending. Analysts from OCBC FX, Frances Cheung, and Christopher Wong, mentioned that this leftist-dominated government was the least anticipated and could strain public finances even further.
Implications for the Euro
Despite the initial shock, the Euro has been on an upward trajectory. Investors seem to be digesting these political changes positively, perhaps seeing stability in the avoidance of far-right leadership. The Euro continues to advance, reflecting investor sentiment and a sense of cautious optimism.
US Dollar Struggles with Soft Employment Data
Weak Employment Data and Speculations on Rate Cuts
On the other side of the pond, the US Dollar isn’t having the best time. Recent US employment data came in softer than expected. This has led traders to speculate that the Federal Reserve might reduce interest rates soon, possibly as early as September. According to the CME’s FedWatch Tool, there’s now a 76.2% chance of a rate cut in September, up significantly from 65.5% just a week earlier.
Impact on EUR/USD
This speculation has weakened the US Dollar, making the Euro stronger in comparison. When the market expects rate cuts, it often leads to a weaker currency because lower interest rates typically mean lower returns on investments denominated in that currency.
Key Events to Watch
Powell’s Semi-Annual Monetary Policy Report
Federal Reserve Chairman Jerome Powell is scheduled to deliver “The Semi-annual Monetary Policy Report” to the US Congress soon. This report could provide a broad overview of the economy and monetary policy. Powell’s remarks, which will be published ahead of his appearance on Capitol Hill, could offer further insights into the Fed’s thinking and potentially impact the EUR/USD pair.
Inflation Data from Germany and the US
On the economic data front, we have some important inflation figures coming up from both Germany and the US. Germany’s Harmonized Index of Consumer Prices (HICP) inflation is expected to remain steady at 2.5% year-over-year in June. Meanwhile, the US Core CPI is anticipated to maintain its year-over-year rate at 3.4%. These figures will be closely watched by traders and could influence the EUR/USD pair.
EURUSD is moving in Symmetrical Triangle and market has reached lower high area of the pattern
Looking Ahead: What to Expect?
Investor Sentiment and Market Movements
As we move forward, the EUR/USD pair’s movement will likely be influenced by a combination of political developments in Europe and economic data from the US. Investors will keep a close eye on Powell’s report and the upcoming inflation data. Any surprises in these areas could lead to significant market movements.
Monitoring the Fed’s Actions
Traders will also be keenly watching the Federal Reserve’s actions. If the Fed does decide to cut interest rates, it could lead to further weakening of the US Dollar, potentially driving the Euro even higher. Conversely, if the employment data improves or if Powell’s report suggests a more hawkish stance, we could see the US Dollar strengthen, putting pressure on the Euro.
Stay Informed and Ready
In these times of economic uncertainty and political surprises, it’s crucial to stay informed and be ready to adapt to new information. The forex market can be quite volatile, and having a good understanding of the factors driving currency movements can help you make better trading decisions.
Summary
So, there you have it! The EUR/USD pair has been on the rise due to a mix of unexpected political developments in France and weak economic data from the US. As traders speculate on potential rate cuts by the Federal Reserve, the Euro continues to gain ground against the US Dollar. Keep an eye on upcoming events like Powell’s monetary policy report and inflation data from Germany and the US for further clues on where the EUR/USD pair might head next. Stay tuned, stay informed, and happy trading!
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