Forex Analysis by Matthew Weller covering: EUR/USD. Read Matthew Weller's latest article on Investing.com
EUR/USD is trying to stage a bounce off the 38.2% Fibonacci retracement of the late-June to mid-July rally.Business survey declined to 87.0 from 88.6, marking its third consecutive decline and the weakest reading since February. In the wake of the disappointing PMI figures yesterday, traders are now pricing in about a 95% chance that the European Central Bank cuts interest rates at its meeting in September.
Across the Atlantic, the US economy failed to take advantage of the weakness in the euro area. Though the Q2 Advancereport was stronger than expected at 2.8% vs. 2.0% anticipated, it’s worth highlighting that this is one of the most lagging of all economic indicators, so it tends to have a relatively limited impact on markets. At the same time, the more timely reports painted a more subdued picture of current US economic activity.
On balance, this run of US economic data has traders fully discounting a 25bps interest rate cut from the Fed in September and an outside chance of 50bps in reductions by then. In other words, both the ECB and Fed are seen as all-but-certain to start cutting interest rates in September, so the key question forTechnically speaking, EUR/USD has transitioned from a near-term uptrend through the first 3 weeks of July into a near-term downtrend over the last week.
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