EUR/USD price holds below 1.08 ahead of Michigan consumer sentiment report
Fed's cautious approach and strong USD keep EUR/USD under pressure
Following Wednesday's significant plunge, EUR/USD recovered 1% the day after but today, bulls remain under pressure below 1.0800, as the week comes to a climax.
Traders are closely watching price movement around the 1.0800 mark, a critical threshold for the pair as it responds to economic signals and policy shifts.
There’s a fresh wave of demand for the US Dollar which has positioned the Greenback to gain ground, overshadowing the Euro’s strength amid mixed signals from both sides of the Atlantic.
The latest 25 basis-point rate cut from the US Federal Reserve, with the Fed signaling a cautious approach toward future rate decisions. Although another rate cut seems likely, the Fed remains data-driven, particularly as it aims to support a stable labor market and move inflation toward its 2% target. The market is on the look out for any further rate adjustments, as the Fed’s next moves will likely hinge on inflation and labor market data, adding momentum for the USD if expectations turn hawkish.
Europe macroeconomic outlook
In Europe, the euro is under pressure as the European Central Bank also leans toward additional rate cuts. Unlike the Fed, the ECB has already cut rates three times this year, with rising expectations of another reduction due to easing inflation risks. Speculation of faster rate reductions from the ECB keeps the Euro soft, especially given the economic strains in the Eurozone, adding a downside risk to the EUR/USD pair.
Adding to the Euro's challenge, Trump’s recent proposals to impose a 10% tariff on imports from all countries could further weigh on the European currency. Europe, a significant exporter to the United States, would face additional trade pressures, potentially impacting the euro’s position against the USD. In light of these economic factors, the pair’s move below 1.0800 emphasizes the renewed US dollar demand and a cautious stance on the euro’s outlook.
Today the upcoming Michigan Consumer Sentiment data will offer new insights into consumer outlook and spending confidence in the US. Any surprises here could ignite volatility in EUR/USD, particularly if the data aligns with the Fed’s measured approach toward inflation and interest rates.
This dollar strength has left EUR/USD vulnerable. EUR/USD fell below 200-day EMA on Trump trade policies
