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EUR/USD’s rebound from three-month lows has faltered, returning to recent intraday bottoms.
Divergence in Eurozone and US data and stark differences in ECB-Fed talks will weigh on EUR/USD.
German industrial production, final EU Q2 GDP and mid-term U.S. employment data will add to the market agenda.
With the start of a “quiet period” for ECB policymakers, Fed talks will take center stage and fears of a soft landing in the US will be acknowledged.
EUR/USD set fresh intraday lows near 1.0718 but reversed the previous day’s corrective bounce off a multi-day bottom to post modest losses heading into Thursday’s European trading session. I
The euro fell to its lowest level in three months against the dollar on Wednesday as a period of silence from the European Central Bank (ECB) ahead of next week’s monetary policy meeting continued to weigh on the single currency. On top of this, worries about a recession in the Eurozone contrasting with fears of a soft landing in the U.S. economy, coupled with hawkish talk from the Federal Reserve (Fed), have also kept major currency pairs in the doldrums as traders await Germany’s July deadline. Final readings of industrial production (IP) and euro area second-quarter (Q2) gross domestic product (GDP).
Generally pessimistic economic data in the euro zone, coupled with unsatisfactory comments from European Central Bank (ECB) policymakers, have exacerbated the difficulties of the Old Continent’s economic slowdown, thereby dragging down the price of the euro. Among the data, German factory orders and euro zone retail sales have recently disappointed the group’s currencies while raising doubts about ECB President Christine Lagarde’s hawkish defense. It is worth noting that several ECB officials were whispering to each other on Wednesday, demonstrating their ability to make a last-ditch effort to raise interest rates, but the market could not believe them.
On the other hand, the ISM Services PMI unexpectedly turned positive and there were no negative details on the S&P Global PMI for August, which together with the Fed’s hawkish comments defended the dollar amid hopes that the world’s largest economy The body can afford higher interest rates. Likewise, the Fed’s Beige Book could signal a soft landing for the US economy.
Elsewhere, U.S.-China tensions over trade terms and Taiwan, as well as talk of weaker economic performance in most other major economies outside the U.S., have also impacted sentiment and EUR/USD via safe-haven demand for the U.S. dollar.
Amid these factors, S&P 500 futures remained under pressure at their lowest levels in a week, falling for a fourth straight day, recording a slight loss near 4,468 points at press time. Nonetheless, the U.S. 10-year Treasury yield hovered around the two-week high of 4.30% hit the previous day, and was last close to 4.29%, while the two-year Treasury yield fell back from its weekly top to 5.01%, with four current gains. The first single-day decline since 2008. As a result, the U.S. dollar index (DXY) held firm at its highest level in six months and was last moderately bought near 104.93.
