The EUR/USD index fluctuates. After a leap forward by the greenback, the EU currency is recovering: what happened and what factors are in the spotlight.
The euro dollar regains momentum in these nervous days for the markets, including for currencies.
At the time of writing EUR/USD has regained traction, extended its daily rebound, and cleared 1.0900 at the start of the US session on Thursday, August 17th. Data out of the US showed that weekly initial jobless claims fell by just 11,000 last week and the USD struggled to find demand, helping the pair higher.
EUR/USD heading for a recovery: what happened
The spotlight came on the dollar yesterday, overshadowing the euro and sending the EUR/USD pair reeling around and below the 1.0900 handle following the Fed minutes.
During the Asian session and in the European morning the single currency was crushed by the rebound in the greenback, which strengthened in the US session on Wednesday as flows from risk assets continued to dominate the financial markets. The focus was on the renewed hawkish tone seen in the Federal Reserve’s July policy meeting minutes, which provided another boost to the currency, forcing EUR/USD to the sidelines.
Forex remains trapped in uncertain messages from central banks. According to the minutes, the Fed could raise rates again amid significant upside risk to inflation, while investors in Europe are divided on whether the ECB will deliver another hike in interest rates, due to a worsening economic outlook.
The latest data showed that core inflation in the euro area did not slow in July as expected, while economic results, particularly for Germany, pointed to a weak outlook. At the same time, at its July meeting, the ECB dropped its guidance that borrowing costs would continue to rise, with Lagarde saying the September outcome would be either a pause or a hike.
In this very uncertain scenario the euro-dollar moves in the name of volatility. The mood remained grim during today’s Asian session Thursday (Aug. 17), amid signs of China’s intervention to lift the Yuan and the real estate crisis escalating and beyond. As a result, global stock markets plunged into the red, while government bond yields rallied, also pushing the dollar.
However, the greenback is now losing strength, and the euro has regained some momentum, albeit still timid, trading at 1.0907. Is the mood changing?
Why did the dollar lose momentum?
Today is moving forward, leaving behind the deeper euro weakness.
In detail, the demand for the greenback has decreased with the opening of the London Stock Exchange, helping the euro to recover ground. A better-than-expected Eurozone Trade Balance added to the EUR/USD recovery, as the seasonally adjusted surplus stood at €12.5bn in June, much better than the previous €0.2bn.
On the other hand, the United States released its initial jobless claims for the week ending Aug. 11, which improved to 239,000, beating 240,000 expectations, while the Philadelphia Fed Manufacturing Survey jumped to 12 in August from -13 .5 of the previous month. The upbeat news from the US strengthened equity sentiment, pushing EUR/USD towards the 1.0910 price zone.
According to ING strategists, “with forward-looking indicators pointing to an economic slowdown in key parts of the euro area, a EUR/USD rally later this year (which is still our base case) should be based mainly on a less attractive dollar rather than a real boom of the euro”.
Original article published on Money.it Italy 2023-08-17 15:15:49. Original title: Euro dollaro in ripresa: cosa può fermare il biglietto verde?
