In the early European session on Tuesday, the EUR/USD pair is trading with a mild negative bias around 1.0950. The Federal Reserve’s Goolsbee mentioned that the central bank might intervene if the economy deteriorates. Traders are now awaiting the Eurozone Retail Sales data for fresh impetus, with expectations of a 0.1% YoY decrease in June.
The financial markets experienced a sell-off on Monday due to concerns about a recession in the US economy, leading to a decline in the US Dollar to year-to-date lows near 102.15. However, a shift in global risk sentiment has eased some market fears. According to economist Andrzej Szczepaniak from Nomura, the panic stemmed from the US employment report released on Friday. Traders are now factoring in a 60% chance of an emergency rate cut by the Fed.
Chicago Fed President Austan Goolsbee stated that the Fed would react to any economic or financial deterioration. Any indications of potential rate cuts by Fed officials could weaken the USD in the short term. On a positive note, the US ISM Service Purchasing Managers Index (PMI) for July exceeded expectations, rising to 51.4 from 48.8 in June.
Aside from a potential emergency rate cut by the Fed, investors are anticipating a 0.5 percentage point interest rate reduction by the European Central Bank (ECB) at its upcoming September meeting. The Eurozone Retail Sales data could provide insights into the Eurozone’s economic health and the ECB’s rate cut trajectory. Stronger-than-expected readings could lift the Euro against the USD.
Euro FAQs
The Euro is the currency for the 20 European Union countries in the Eurozone and is the second most traded currency globally. The European Central Bank (ECB) manages monetary policy and interest rates for the Eurozone, aiming to maintain price stability. Eurozone inflation data, economic indicators, and trade balance all influence the Euro’s value.