EURUSD recovers as the US dollar stays weak in the run-up to the US Q2 flash GDP.
EURUSD rebounds to near 1.0850 in Thursday’s European session. Despite the Euro’s near-term future remaining uncertain due to strong expectations of further rate reduction by the European Central Bank (ECB) and growing concerns about German economic prospects.
The ECB projected to drop interest rates twice more this year. As price pressures are expected to persist at their present levels for the entire year and return to the bank’s target in 2025. Some ECB officials view current market expectations for rate reduction as appropriate.
The German government announces tax cuts for individuals and businesses.
Meanwhile, a dramatic drop in Eurozone corporate activity, particularly in the bloc’s largest country, Germany, has increased expectations of further interest rate cuts this year to stimulate economic development. The German flash Composite Purchasing Managers Index (PMI) unexpectedly dropped in July. Hamburg Commercial Bank (HCOB) stated on Wednesday. That the preliminary German Composite PMI fell unexpectedly to 48.7 in July. The lowest figure in four months. The economy narrowly avoided a recession last year, but it contracted by 0.3%.
Poor German activity has also lowered its business sentiment index. The German IFO corporate Climate Index. An early predictor of current circumstances and corporate expectations, fell unexpectedly to 87 in July. Investors expected the sentiment data to The reading has risen to 88.9 from 88.6 in June. In the same period, the Expectations index unexpectedly fell to 86.9 from estimates of 89.0 and the previous publication of 88.8. Which was revised downward from 89.0.
Moreover In an effort to stimulate total consumption. The German government plans to grant tax breaks to firms and people. The tax relief plan proposed by German Finance Minister Christian Lindner on Wednesday will result in a 30-billion-euro reduction in the tax burden in 2025 and 2026, allowing the economy to spend and invest more freely.
Daily Market movers: EURUSD rebounds, but the Euro outlook remains uncertain
EURUSD rebounds to around 1.0850. The major currency pair rise. As the US Dollar (USD) displays A slow performance on the United States’ (US) Q2 flash Gross Domestic Product (GDP) day. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, hovering just below its weekly high of 104.50.
The US Q2 GDP expected to expand at a quicker rate of 2.0% than the previous release of 1.4% on an annualized basis, but the GDP Price Index, a key measure of changes in the prices of goods and services provided, is expected to slow to 2.6%. This would raise expectations of rate reduction by the Federal Reserve (Fed).
According to the CME FedWatch tool, 30-day Federal Fund futures pricing data indicate that a rate drop in September is almost inevitable. Data also suggest that the Fed will Interest rates have been reduced twice this year.
Investors will watch Durable Goods Orders for June.
In addition to US Q2 GDP statistics, investors will watch Durable Goods Orders for June. Which are predicted to expand at a stronger rate of 0.3% than May’s reading of 0.1%.
This week’s primary trigger for the US Dollar will be the June Personal Consumption Expenditures Price Index (PCE) data. Which will be released on Friday. The core PCE inflation rate, the Fed’s favored inflation indicator, will reveal whether market expectations for rate decreases in September are justified.
Underlying inflation expected to have slowed to 2.5% from 2.6% in May, with the monthly figure rising consistently by 0.1%. The scenario in which inflationary pressures decline in line with expectations or at A faster pace will be detrimental for the US Dollar because it will raise rate cut expectations. On the contrary, consistent or higher-than-expected inflation growth will compel speculators to reduce Fed rate-cut bets in September.
