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EUR/USD dips as German business climate fallsThe euro is in negative territory on Monday. In the European session, EUR/USD is trading at 1.1156 at the time of writing, down 0.32% on the day. The euro posted strong gains on Friday, rising 0.73% and breaking above 1.12 for the first time since July 17. The markets got what they were looking for from Federal Reserve Chair Powell on Friday – an endorsement for a rate cut. Powell didn’t specify when the Fed would cut but said that the “time has come for policy to adjust”. Investors are ready for the Fed’s first rate cut in over four years at the Sept. 18 meeting. What is still up in the air is the size of the cut. Just one month ago, the odds of a 25-basis point cut stood at 88% and 12% for a cut of 50 bps, according to the CME’s FedWatch. Since then, the US economy has posted some weaker-than-expected data and the probability of a 25-bps reduction has fallen to 63.5% for a 25-bps cut vs. 36.5% for a 50 bps move. One key factor in the Fed’s decision will be the August jobs report on Sept. 6. A very weak report for July panicked investors that the US economy was hurtling towards a recession and financial markets were routed before bouncing back. Another weak jobs report could rattle investors and push the Fed to respond with a 50-bps cut. The expected September cut will mark the start of a new rate cycle for the Fed, which has maintained rates at 5.25%-5.50% for over a year. The Fed is expected to lower rates at least one more time this year and continue trimming into 2025. Germany’s Ifo Institute business climate sentiment index declined in August for a fourth consecutive time as the German economy continues to struggle. The index eased to 86.6, down from 87.0 but above the market estimate of 86.0. The survey’s manufacturing component dropped sharply and the services component also fell. EUR/USD is testing support at 1.1165. Below, there is support at 1.1130 1.1229 and 1.1264 are the next resistance lines
by OANDA
EUR/USD steady as German Business Climate unchangedThe euro is drifting on Monday. EUR/USD is down 0.05%, trading at 1.0849 in the North American session at the time of writing. US markets are closed for Memorial Day, which will likely mean a quiet day for the US dollar. In Europe, German Ifo Business Climate stagnated in May and was steady at 89.3. This unchanged from the downwardly revised 89.3 in April and short of the market estimate of 90.4. The German economy, the largest in the eurozone, has struggled although they have been signs of recovery. GDP grew by just 0.2% in the first quarter, after contracting in the fourth quarter of 2023. The ECB meets on June 6th and its credibility is on the line if it doesn’t deliver a rate cut which would be the first since March 2016. ECB President Christine Lagarde said last week that there was a “strong likelihood” of a rate cut in June and stated that she was confident that inflation was under control. This sounded like a strong endorsement of a rate cut next week. Bundesbank President Joachim Nagel also signaled that a rate cut was coming in June, dismissing concerns over wage growth, which rose from 4.5% to 4.7%. Nagel stressed that a June cut did not signal the start of a series of cuts, as ECB decisions will depend on incoming data. The eurozone releases the May inflation report on Friday, which isn’t expected to change expectations of a June rate cut. CPI fell to 2.4% y/y in April and is expected to tick higher to 2.5% in May. EUR/USD has weak support at 1.0845. Below, there is support at 1.0806 There is resistance at 1.0886 and 1.0925
by OANDA
EUR/USD steady as German GDP contractsThe euro is almost unchanged on Friday. In the European session, EUR/USD is trading at 1.0903, down 0.03%. German GDP posted a minor drop in the third quarter, coming in at -0.1% q/q. This was down slightly from -0.1% in the second quarter and matched the market consensus. On an annualized basis, GDP declined by 0.4%, down from a revised o.1% gain in Q2 and missing the market consensus of -0.3%. The consumer spending component of GDP decelerated in the third quarter and was a key driver of the decline in GDP. German consumers remain in a sour mood and are being squeezed by rising interest rates and a high inflation rate of 3.8%. The German business sector is also pessimistic about economic conditions. The Ifo Business Climate index managed to climb to 87.3 in November, up from 86.9 in October but below the market consensus of 87.5. A reading below 100 indicates that a majority of the companies surveyed expect business conditions to deteriorate in the next six months. Earlier this week, German services and manufacturing PMIs pointed came in below 50, which points to contraction. The manufacturing sector is particularly weak and has been in decline since June 2022. It has been a relatively light week for US releases, with markets back in action after the Thanksgiving holiday. Later today, the US releases manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November are 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If the readings diverge significantly from the estimates, we could see some strong movement from the US dollar before the weekend. There is resistance at 1.0943 and 1.0997 1.0831 and 1.0748 are providing support
by OANDA
EUR/USD slips to 10-week low after soft German business climateThe euro has posted limited gains at the start of the trading week. In the North American session, EUR/USD is trading at 1.0803, up 0.08%. The week ended on a sour note as German Ifo Business Climate fell for a fourth straight month in August to 85.7, down from an upwardly revised 87.4 and shy of the market consensus of 86.7. Germany's GDP flatlined in the second quarter, after two straight declines. The eurozone's largest economy is sputtering and a string of weak data provides support for the ECB to take a pause at the September meeting. Federal Chair Jerome Powell delivered the keynote speech at the Jackson Hole summit on Friday and his message was one of caution and on the hawkish side. Powell reiterated that the battle to lower inflation to the 2% target "still has a long way to go". The Fed has lowered inflation to around 3% but the hardest part could be bringing it down to 2%. With regard to rate policy, Powell was cautious, saying that the Fed would "proceed carefully" in deciding whether to raise rates or pause and wait for additional data. There was no mention of rate cuts, a signal that the Fed isn't looking to trim rates anytime soon. The markets raised the odds of a rate hike in September in response to the speech, from 14% a week ago to 21% at the time of writing. ECB President Christine Lagarde also attended the Jackson Hole meeting but like Powell, played it safe with remarks that we've heard more than once in the past. Lagarde said that the ECB's rate path would be data-dependent at each meeting and that it was critical that inflation expectations remained anchored at the 2% target. Lagarde tried to sound optimistic, saying she was confident that inflation numbers would look different at the end of 2023. Eurozone inflation is heading in the right direction but is still high at 5.3%. The central bank meets next on September 14th and it's unclear whether the ECB will raise rates for an eighth straight time or take a pause and monitor how the economy is performing. The benchmark rate is relatively low at 3.75%, but the eurozone economy has not looked good and higher rates increase the chances of the weak economy falling into recession. . EUR/USD is putting pressure on resistance at 1.0831. The next resistance line is 1.0896 1.0795 is a weak support level. Below, there is support at 1.0731
by OANDA
EUR/USD - Will Lagarde shake up the euro?EUR/USD has edged lower on Wednesday. In the European session, EUR/USD is trading at 1.0939, up 0.20%. The German GfK Consumer Sentiment report found that consumer confidence is expected to fall in July to -25.4, down from a downwardly revised -24.4 in June. The report noted that the German consumer is reluctant to spend due to economic uncertainty, and high inflation has eroded the purchasing power of households. The consumer confidence release comes on the heels of the German Ifo Business Climate index, which fell from 91.7 to 88.5 in June. This missed expectations and marked the index's lowest level this year. The weak confidence numbers highlight a persistent lack of confidence in the German economy. The ECB, which continues to signal that more rate hikes are coming, finds itself between a rock and a hard place. The Bank's number one priority is curbing inflation, which will require more rate hikes. However, tightening too quickly runs the risk of choking economic activity and tipping the German economy into a recession. How far will the ECB go in raising interest rates? Investors hope to get some clues from ECB President Lagarde later today when she participates in a panel on policy at the ECB bank forum in Sintra. Lagarde said on Tuesday that eurozone inflation remains too high and reiterated that ECB policy "needs to be decided meeting by meeting and has to remain data-dependent.” In the US, Tuesday's strong releases were further proof of a solid economy. Durable Goods Orders and New Home Sales were higher and beat expectations, and Conference Board Consumer Confidence jumped in June from 102.5 to 109.7, its highest level since January 2022. These strong releases will provide support for the hawkish Fed, which is expected to raise rates in July and again in September or October. EUR/USD is putting pressure on support at 1.0916. Next, there is support at 1.0822 1.0988 and 1.1082 are the next resistance lines
by OANDA