Potential US macro weakness and ECB & BoE status quo likely to support gains
EUR (1.091) ▲
- Initially pressured by uncertainty surrounding the French election and weakening below the 1.07/USD level, the EUR rebounded above the 1.09 mark despite the unexpected hung parliament outcome. The primary catalyst for this recovery was USD weakness, driven by cooler-than-anticipated US June CPI readings and Fed’s dovish commentary. Mixed EU economic data has pushed market expectations of the ECB's next rate cut decision to September, further supporting the euro.
- With the ECB not expected to cut rates this Thursday, especially in light of rising wage growth and persistent services inflation, the euro may stabilise around the 1.09/USD level. This is particularly likely given the ongoing downside risks for the USD. Continued signs of economic weakness in the US, which may bolster the case for a September rate cut by the Fed, could further support the euro. However, the ongoing political limbo in the eurozone may limit these gains.
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