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The Euro was consolidating serenely, in the form of a small pennant against the Dollar, which for its part was digesting the now almost established scenario of a first rate cut at the start of the school year, or even a second in 2024, at the last FOMC of the year. The very encouraging signals on inflation indeed suggest a soft landing for the world’s largest economy.
“The easing of inflation has strengthened the assumptions of a first rate cut by the Fed in September,” summarizes Alexandre Baradez (IG France). The CME Group’s FedWatch tool now puts the probability of such a scenario at 92.50%. As a reminder, this valuable tool allows you to analyze the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts.
This probability had already increased significantly the previous week with the ISM Services falling below the 50-point mark and the uneventful content of the NFP employment report. But now, the June CPIs (consumer price indices) have transformed the test.
The news also focuses on the presidential elections this fall.
“As tragic as it may be, this virtually closes the Trump/Biden duel in the run-up to the US presidential election,” says Thomas Giudici, head of bond management at Auris Gestion. “The contrast is indeed striking between, on the one hand, an outgoing president who is struggling to convince people about his health, making one blunder after another, and on the other, the almost Hollywood image of a bloodied Trump, his fist raised, haranguing the crowd under chants of “USA! USA!” The Republican convention, which begins today, should confirm his inauguration and reveal his future vice-president. The implementation of his rather inflationary program will depend on his majority in Congress.”
On this side of the Atlantic, ahead of the ECB’s monetary policy meeting (Governing Council) which will end on Thursday, Konstantin VEIT, portfolio manager at PIMCO, predicts a meeting “without major events”.
“The strength of the labour market allows the ECB to take time to gather new information. As a result, the ECB is in no rush to cut rates further; decisions will be taken on a meeting-by-meeting basis, and the evolution of data over the coming months will determine how quickly the ECB withdraws additional restrictive measures.”
The consensus is therefore on the status quo.
To follow are retail sales across the Atlantic at 2:30 p.m., and the NAHB index of the American residential market at 4:00 p.m.
In the immediate future, traders are dealing with the publication of the ZEW index of confidence in the German economy, which fell less sharply than expected, to 41.8.
“The economic outlook for the Eurozone’s largest economy is deteriorating. For the first time in a year, economic expectations for Germany are falling. The fact that German exports fell more than expected in May, political uncertainty in France and the lack of clarity regarding the ECB’s future monetary policy have contributed to this development,” comments ZEW President Professor Achim Wambach on the survey results.
At midday on the foreign exchange market, the Euro was trading against $1,0890 approximately.
KEY GRAPHIC ELEMENTS
In a strong volatility in week 27, the Euro / Dollar currency pair regained the upper part of a bearish oblique line, constituting a short-term oxygen supply. The technical signals are contradictory in the immediate future and do not allow a serene position-taking. In any case, we are suspending our sell lines. We are currently witnessing a test of a resistance level located at $1.0885.
MEDIUM TERM FORECAST
Considering the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD) parity.
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity rates are positioned between the support at 1.0758 USD and the resistance at 1.1012 USD.
The News Bulletin 247 council
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