EURUSD rises despite a dismal preliminary Eurozone PMI.

The EURUSD rebounded to reach 1.0850 as the US Dollar (USD) fell following a mixed preliminary S&P Global PMI report for July in Wednesday’s American session. The Composite PMI rose to 55.0 from 54.8 in the previous edition, owing to strong activity increase in the service sector. The Service PMI unexpectedly grew at a quicker rate to 56.0. Economists expected the data to remain lower at 54.4, compared to the previous reading of 55.3. Manufacturing PMI unexpectedly It fell to 49.5, despite expectations of an increase to 51.7. A value below 50.0 indicates a decrease in industrial operations.

Market sentiment remains negative, with expectations that Donald Trump will win.

Meanwhile, market sentiment remains negative, with expectations that Donald Trump will win the United States (US) presidential elections in November and uncertainty surrounding the Personal Consumption Expenditures Price Index (PCE) data for June, which will be released on Friday.

The US Dollar Index (DXY), which analyzes the US dollar’s value against six major currencies, has fallen from a new weekly high of 104.50. Following an assassination attempt on Trump, expectations for his return to power increased. Meanwhile, Democrats have picked Vice President Kamala Harris to head the fight against Republicans.

Investors will closely monitor economic developments. Focus on the US core PCE inflation statistics, as it will provide new clues about when the Federal Reserve (Fed) will begin lowering interest rates. The report is expected to indicate that core PCE inflation, the Fed’s preferred inflation metric, fell to 2.5% from 2.6% in May, with the monthly amount rising consistently by 0.1%.

If price pressures fall as expected or quicker than expected, prospects of early Fed rate reduction will rise. On the contrary, stubborn numbers would undermine rate-cutting bets. According to the CME FedWatch tool, 30-day Federal Fund futures indicate that the central bank will begin cutting its benchmark borrowing rates from current levels at the September meeting.

Daily Market movers: EURUSD recovers as US The dollar falls further.

EURUSD regains the majority of its intraday losses after correcting to roughly 1.0825 in Wednesday’s New York session. The major currency pair has recovered, despite the fact that the preliminary Eurozone Hamburg Commercial Bank (HCOB) Purchasing Managers’ Index (PMI) data for July showed that composite figures unexpectedly fell due to a slowdown in manufacturing and service sector activity.
The HCOB Composite PMI fell to 50.1, just beyond the 50 threshold that distinguishes expansion and contraction. Investors predicted the Composite PMI to rise quicker to 51.1 from its previous publication of 50.9. The HCOB Manufacturing PMI fell to 45.6, while the Services PMI grew at a slower pace (51.9).
The statements of Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated on the flash PMI that poor demand in the Eurozone’s largest economy has had a significant impact on the manufacturing sector. According to De la Rubia, “French service providers increased their business activity in July as a result of Olympic preparations.” In contrast, demand in Germany’s industrial sector appears to have driven down total private sector output.

Investors are looking for new interest rate direction from the US core PCE inflation figure.

The Eurozone’s sluggish economic growth is expected to raise expectations of further rate reduction from the European Central Bank (ECB). However, the pricing figures did not provide any relief to ECB policymakers. According to the preliminary PMI report, input prices in the services sector climbed quicker, while selling prices rose at a similar rate to the prior survey period.
Currently, Traders predict that the ECB will slash interest rates twice more this year. Also, a few ECB officials believe that market expectations of two more rate decreases are justified.