Euro trades within a tight range vs. the US Dollar
The Euro (EUR) seems to have met some initial resistance around the 1.1240 regions vs. the US Dollar (USD) so far on Friday. In fact, after reaching new highs in the 1.1240/45 band earlier in the Asian trading hours, EUR/USD now seems to have taken a breather amidst a marginal recovery attempt in the Greenback. Despite the so-far lackluster bounce, the US Dollar remains under heavy pressure as investors continue to anticipate the likelihood that the Federal Reserve might be nearing the end of its tightening campaign. This view has been reinforced as of late on the back of further signs of cooling US consumer prices as well as the persistent downtrend in producer prices.
In the meantime, comments by the FOMC’s Governor Christopher Waller late on Thursday fell in line with the persevering hawkish narrative from his colleagues at the Committee after he suggested that the Fed might need two more rate hikes this year. The strong upside impulse in the pair has been reinvigorated in response to lower-than-expected US inflation figures for the month of June, which, firstly, confirm that disinflationary forces remain well in place in the US economy and, secondly, underpinning expectations that the Federal Reserve might end its ongoing hiking campaign sooner rather than later. So far, market participants have already largely priced in a quarter-point rate hike by both the European Central Bank (ECB) and the Fed at their meetings later in the month, in a context where the potential future actions of the Fed and the ECB in normalizing their monetary policies continue to be a topic of discussion, especially with increasing concerns about an economic slowdown on both sides of the Atlantic. In the domestic calendar, the euro area printed a €0.3B deficit in May in what was the sole publication in the old continent at the end of the week. In the US docket, all the attention is expected to be on the preliminary readings of the Michigan Consumer Sentiment for the current month.