EUR/USD: Inflation slows, the greenback in the red

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Although it favored the equity markets, and especially the technological section of the American quotation, the very marked easing on the markets for federal sovereign bonds caused a very significant drop in the Dollar, with the Euro/Dollar pair returning to levels which had not been relevant since February 2022.

As a reminder, As a reminder, The US CPIs for June showed this week, to the relief of traders, a moderate but noticeable cooling in price dynamics, which they can cross with the conclusions of the latest employment report , also showing an albeit slow drop in temperature. In detail, prices, food and energy included, rose in June at an annualized rate of 3.0%, whereas the consensus, already optimistic, foreshadowed an increase of 3.1%. Excluding food and energy, elements considered volatile, the monthly rise in prices is 0.2%, also below the consensus. The PPIs published yesterday (producer price indices) corroborated this trend towards a cooling of the economic machine.

Is the Fed about to win its bet? In any case, it is achieving tangible results, its challenge remaining enormous: bringing the price trajectory back to +2% without a hard landing in activity. In any case, the course of a firm monetary policy will be maintained in the coming months and there is no question of talking about a pivot. The scenario of a 25 basis point rise in Fed Funds at the end of the month is almost complete.

“At this time, the Fed is assessing the lagged effect of policy rate increases, while closely monitoring data and developments in the banking turmoil,” three Jupiter AM managers agree in a note. market. “Because the path to an eventual rate cut is not necessarily linear. The “Goldilocks” scenario of slower growth containing inflation and in turn leading to rate cuts this year seems to have been pushed back much further than expected at the start of the year. Until inflation has fallen to acceptable levels, interest rates will remain high, which means positioning will remain on the edge.”

For the time being, the single currency is also supported by a reduction in the monthly trade balance deficit, almost at equilibrium in the Euro Zone, beating expectations. We will also follow at 4:00 p.m. the publication of the American consumer confidence index within the meaning of the University of Michigan, expected to rise to 65.5 in preliminary data.

At midday on the foreign exchange market, the Euro was trading against $1.1235 approximately.

KEY GRAPHIC ELEMENTS

The level at $1.10, a key level, is fully qualified as support, given the volatility when it is crossed. It shattered. We expect engagement in an episode of consolidation of this very recent advance.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.1100 USD and the resistance at 1.1300 USD.

CHART IN DAILY DATA