Euro regains positive momentum today | 23 August 2024

An event to look out for today:

17:00 GMT+3. USD - Jerome Powell, Chairman of the Federal Reserve Board of Governors, will deliver a speech

EURUSD:

The EURUSD pair is regaining positive momentum today and for the moment seems to have paused its pullback from the one-year high reached on Wednesday. Spot prices are currently trading around 1.1125.

Data released on Wednesday showed that US job growth in the last year to March was much weaker than originally anticipated. In addition, a rise in weekly initial jobless claims pointed to a cooling labour market, which, along with a decline in the US manufacturing PMI, suggests that the economy is in danger of slowing down. This, in turn, confirms market forecasts of an imminent start to the Federal Reserve (Fed) rate-cutting cycle in September and does not help the dollar to capitalise on a nice bounce from its low since the start of the year. This largely overshadowed the mixed Eurozone PMI data released on Thursday and is proving to be a key factor providing some support for EUR/USD.

Indeed, the preliminary composite Eurozone PMI from S&P Global came in at 54.1 compared to the forecast of 53.5, although it showed a slight decline from 54.3 in the previous month. Meanwhile, business activity in Germany, the Eurozone's largest economy, contracted for the second consecutive month and more than expected. In addition, wage growth in the Eurozone slowed to 3.55 per cent in Q2 2024 from 4.74 per cent in Q1 2024. This in turn strengthens the case for two more rate cuts by the European Central Bank (ECB) this year. This could deter traders from aggressively bullish bets on the common currency and limit any meaningful strengthening movement in EUR/USD.

Meanwhile, reports from the ECB's July meeting indicated that the September meeting was perceived as an appropriate time to reassess the level of monetary policy tightening. In addition, ECB Governing Council member Martins Cazacs expressed confidence that inflation will return to the 2% level and also said that he is willing to discuss another interest rate cut at the September meeting. Thus, any further upward movement could face some resistance, although bearish sentiment around the US Dollar may continue to act as a tailwind for EUR/USD.

Trading recommendation: Trade predominantly with Buy orders from the current price level

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