EURUSD remains on the backfoot on Tuesday, slightly above 1.0700, as the major currency pair comes under pressure due to expected decline in the preliminary Eurozone HICP data for June.
The annual Harmonised Index of Consumer Prices decelerated to 2.5%, as expected, year-on-year from May’s reading of 2.6%. In the same period, the core HICP, which excludes volatile components like food, energy, alcohol and tobacco, grew steadily by 2.9%.
Investors expected the underlying inflation to have declined to 2.8%.
Core inflation measure rose at a steady pace due to sticky service inflation. Price pressures in the service sector rose in line with the pace of 4.1% as registered in May. Current inflation readings are unlikely to provide cues about where price pressures are heading
On Monday, the preliminary German HICP report for June showed that price pressures softened more than expected, opening the door for the ECB to make back-to-back rate cuts.
However, policymakers have refrained from providing a specific rate-cut path as they worry that an aggressive policy-easing campaign could revamp price pressures again.
Also, ECB President Christine Lagarde said at the ECB Forum on Central Banking on Monday that, “ot will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed.”
“The strong labor market means that we can take time to gather new information,” Reuters quoted Lagarde as saying.
Meanwhile, uncertainty ahead of France’s second-round runoffs scheduled on July 7 will also keep the Euro on its toes. As per the exit polls for the first round of the parliamentary elections, Marine Le Pen’s far-right National Rally (RN) is in a comfortable position but with a smaller margin than projected.
The DXY Dollar Index, which tracks the greenback’s value against six major currencies, recovered sharply to near 106.00.
Meanwhile, investors look for more cues about when the Federal Reserve will start reducing interest rates this year. The focus will be on Fed Chair Jerome Powell’s speech, later in the day.
Currently, financial markets expect the Fed to start reducing interest rates from the September meeting. Two rate cuts this year, against only one cut projected by Fed policymakers in their latest dot plot, are expected.
Apart from Powell’s speech, investors will also focus on the JOLTS Job Openings data for May. Economists expect that employers posted 7.9 mln job vacancies, slightly lower than April’s reading of 8.06 mln.
Technical analysis by TradingView: EUR/USD seems vulnerable above 1.0700
(Source: OANDA)
