EURUSD is moving in Ascending channel and market has rebounded from the higher low area of the channel
EUR/USD Recovery: What’s Driving the Market?
The EUR/USD currency pair has been on an interesting journey this week. From a slump at the beginning of the week to a notable recovery towards 1.0800, there have been several factors at play. Let’s dive into the details of what’s driving these market moves, focusing on the broader trends and key economic data without getting bogged down in technical jargon.
Broader Market Influences: Rate Cut Expectations
One of the primary drivers behind the EUR/USD recovery is the market’s anticipation of a potential rate cut by the Federal Reserve (Fed). This sentiment was bolstered after Fed Chairman Jerome Powell’s recent testimony before the US Congressional committees. His cautious remarks about the progress on inflation were interpreted by the markets as dovish, sparking hopes for a rate cut.
Investors are particularly hopeful for a rate cut in September, which has led to a recovery in market sentiment. This renewed optimism is reflected in the broad selling of the Greenback, pushing the EUR/USD pair higher.
EU Data and US Inflation: What’s on the Horizon?
While the European Union (EU) data front has been relatively quiet, there’s significant attention on upcoming US inflation figures. This week’s economic calendar features some key prints that could shape market expectations and movements.
European Data: The German HICP
On Thursday, markets will be eyeing the final German Harmonized Index of Consumer Prices (HICP) inflation data. Although no major changes are expected, with the annualized figure for June predicted to hold steady at 2.5%, this data point is still crucial for understanding the broader inflation trends in the EU.
US Inflation Data: A Double-Header Event
The real market movers are anticipated to be the US inflation data due on Thursday and Friday.
Thursday’s CPI Data
On Thursday, the focus will be on the Consumer Price Index (CPI) inflation figures. The median market forecast expects the annualized core CPI inflation in June to remain at 3.4%. If the actual numbers come in lower than expected, it could further bolster the case for a rate cut, influencing the EUR/USD pair.
EURUSD is moving in Symmetrical Triangle and market has reached lower high area of the pattern
Friday’s PPI Data
Friday will bring the core Producer Price Index (PPI) wholesale inflation data. The PPI is expected to show an increase to 2.5% year-over-year from the previous 2.3%. This figure is critical as it provides insight into the wholesale price pressures in the economy, which could impact overall inflation expectations and rate cut speculations.
The Market Sentiment: Riding the Waves of Expectations
The Fed’s Dovish Stance
The markets are riding high on the back of renewed hopes for a rate cut, largely driven by the Fed’s seemingly dovish stance. Chairman Powell’s acknowledgment of progress on inflation, albeit cautious, has reignited risk appetite among investors. This shift in sentiment is a significant factor behind the EUR/USD pair’s recent recovery.
Investor Focus on Inflation Data
With the spotlight on US inflation data, investors are keenly awaiting the CPI and PPI figures. These data points are pivotal as they will provide further clarity on the inflation trajectory and the potential actions the Fed might take. Lower-than-expected inflation figures could reinforce the market’s rate cut expectations, leading to further moves in the EUR/USD pair.
Final Summary
In the world of forex, the interplay between economic data and market expectations is always dynamic. The EUR/USD pair’s recent recovery highlights how broader market trends and key economic indicators can drive significant movements. As we look ahead, the upcoming US inflation data will be crucial in shaping the market’s expectations and the EUR/USD’s trajectory. Investors and traders alike will be watching closely, hoping for signals that could indicate the Fed’s next moves and the future direction of this major currency pair.
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