Important events today:
16:30 UTC: USD – Federal Reserve Chair Jerome Powell will give a speech.
The EUR/USD pair attracts sellers around the 1.0885 level in early Asian trading on Monday. The main pair declines amid risk aversion, prompting fresh bids for the US dollar (USD).
Wholesale inflation in the US, measured by the Producer Price Index (PPI), rose to 2.6% year-on-year in June from a revised 2.4% in the previous reading, above the consensus of 2.3%. The core Producer Price Index rose to 3.0% year-on-year, exceeding the expected 2.5%. However, attention remains focused on the recent rise in the Consumer Price Index (CPI), which has increased expectations of a rate cut.
Moreover, the University of Michigan’s Consumer Sentiment Index fell to 66.0 in July from 68.2 in June, the lowest reading in the last seven months, and missed the expected increase to 68.5. Five-year consumer inflation expectations slightly decreased to 2.9% in July from the previous 3.0%.
Analysts at Fitch stated that the Federal Open Market Committee (FOMC) might lower interest rates sooner rather than later, citing potential concerns of the Fed about the labor market. The Fed will be worried about additional labor market weakness in the future.
Political events in the US over the weekend strengthened the safe-haven currency, the US dollar, creating headwinds for the EUR/USD pair. During a rally in Butler, Pennsylvania, on Saturday, former President Donald Trump was injured in an assassination attempt. One spectator was killed, two others were seriously injured, and Trump was seen with blood flowing from his ear, reports the BBC.
As for the euro, officials expect price pressure to remain close to the current level throughout the year, reducing expectations of further rate cuts by the European Central Bank (ECB). ECB President Christine Lagarde emphasized her cautious approach this month, stating: “A strong labor market means we can take time to gather new information, but we must also be mindful that growth prospects remain uncertain.”
Recommendations: Trading mainly with Buy orders from the current price level.