26/07/2024
Written by: Ian Morley
Summary:
Demand for USD strengthened on Friday afternoon after the core PCE inflation figures surpassed expectations, registering at 2.8% compared to the anticipated 2.7%. Consequently, GBPUSD and EURUSD struggled to surpass crucial resistance levels, leading to a decline in these pairs. Technical analysis indicates potential further declines for both pairs, particularly in light of upcoming data releases in the US this week.
Speeches:
Market Insight:
The focus this week will be on the US dollar, as a slew of job-related data and the Federal Reserve policy meeting on Wednesday evening are anticipated. While no adjustments to the Fed’s interest rate are foreseen, any additional hawkish rhetoric from the Fed coupled with robust job figures could eliminate the possibility of rate cuts for the remainder of the year. This scenario would likely exert downward pressure on GBPUSD and EURUSD, given the divergence in rate policies between their respective central banks.
Ahead of the US data releases, attention will turn to Europe’s inflation figures on Tuesday, which are expected to indicate further declines in the core CPI. Continued signs of disinflationary pressures could prompt markets to factor in a second rate cut by the European Central Bank (ECB) in July rather than September, potentially exerting a negative impact on EUR.
The day ahead is relatively quiet, with only consumer confidence figures scheduled for release in Europe. Speculation this morning regarding intervention by Japanese authorities on USDJPY has led to widespread USD selling, reversing some of the gains made by the USD on Friday. However, this downturn may prove short-lived, presenting an opportunity for USD buyers to enter the market near key resistance levels. Should underlying fundamentals, along with this week’s Fed commentary and data, support hawkish rate expectations, further gains for the USD can be anticipated.
Analysis:
Throughout the week, the USD experienced some weakness following a lower-than-expected PMI figure, resulting in GBPUSD and EURUSD retracing to previous support levels, which have now turned into resistance. However, Friday’s higher core PCE figure spurred demand for USD, causing both pairs to decline. Once again, the focus is on the USD this week, with the upcoming Fed meeting and job-related data releases.