EUR/USD is flat near one-week lows ahead of the FOMC Minutes
- The Euro remains depressed on Wednesday as Eurozone CPI confirmed that inflation remained steady in July.
- Traders ponder the progress on a peace deal in Ukraine after the Kremlin cooled hopes of an immediate meeting between Putin and Zelenskyy.
- The FOMC Minutes will be released later on Wednesday and show the division within the committee.
The EUR/USD is posting marginal losses ahead of the US session opening on Wednesday. The pair is trading at 1.1643 at the time of writing after having hit a fresh weekly low near 1.1620 earlier on the day. A more cautious market sentiment, ahead of the minutes of the latest FOMC meeting, and the Federal Reserve's (Fed) Jackson Hole annual symposium, is boosting support for the safe-haven US Dollar (USD) .
The final Eurozone Consumer Prices Index (CPI) figures released by Eurostat have confirmed that inflation remained steady in July. Somewhat earlierECB's Lagarde's comments at the World Economic Forum in Geneva have failed to lift the Euro. Lagarde has warned that the recent trade deals do not eliminate economic uncertainty and forecasted softer growth in the fourth quarter, although, in her opinion, the Euro Area's economy has proved resilient this year.
Beyond the Euro Area, investors' initial enthusiasm after the meeting between US President Donald Trump and his Ukrainian counterpart, Volodymyr Zelenskyy, has been curbed by comments from the Kremlin, cooling hopes that Russian President Vladimir Putin will meet Zelenskyy shortly, which has added some weight to the Euro.
Later in the day, the Minutes of the latest Federal Reserve meeting will be carefully analysed, but their impact on the US Dollar is likely to be limited, as investors will be looking for Fed Chair Jerome Powell's conference at the Jackson Hole symposium on Friday for fresher cues about the bank's near-term policy plans.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | -0.10% | 0.01% | 0.06% | 0.32% | 1.23% | 0.01% | |
| EUR | -0.07% | -0.18% | -0.21% | -0.01% | 0.27% | 1.09% | -0.07% | |
| GBP | 0.10% | 0.18% | 0.00% | 0.16% | 0.38% | 1.17% | 0.12% | |
| JPY | -0.01% | 0.21% | 0.00% | 0.16% | 0.42% | 1.30% | 0.24% | |
| CAD | -0.06% | 0.00% | -0.16% | -0.16% | 0.29% | 1.17% | -0.04% | |
| AUD | -0.32% | -0.27% | -0.38% | -0.42% | -0.29% | 0.79% | -0.26% | |
| NZD | -1.23% | -1.09% | -1.17% | -1.30% | -1.17% | -0.79% | -1.12% | |
| CHF | -0.01% | 0.07% | -0.12% | -0.24% | 0.04% | 0.26% | 1.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Risk aversion is lifting the US Dollar
- In the absence of key macroeconomic releases, the sell-off on Wall Street, led by the tech sector amid growing concerns about the Government's interventionism in it, has boosted risk aversion. Asian markets have followed the track, and European bourses are expected to open with losses. The safe-haven US Dollar tends to thrive in this context, while the Euro struggles.
- Beyond that, investors are pondering the progress on a steady peace deal in Ukraine, and Russia's cool reaction to the Trump-Zelenskyy meeting has not helped to lift optimism. The Kremlin has offered Moscow as the place for a Trump-Zelenskyy meeting, a possibility that has been refused by the Ukrainian president, leaving the Russia-Ukraine peace talks in the air.
- In Europe, Eurostat has confirmed CPI preliminary estimations showing that headline inflation remained steady in July, and 2% above the same month last year. Core inflation contracted 0.2% in July and rose at a 2.3% yearly pace.
- Somewhat earlier, data released by Destatis revealed that the German Producer Prices Index contracted 0.1% in July against expectations of a steady 0.1% growth. Year-on-year, producer prices contracted at a 1.5% pace, their weakest reading in more than a year, following a 1.3% contraction in June, and beyond the market forecasts of another 1.3% drop.
- Later on Wednesday, the Federal Reserve will release the minutes of its last Federal Open Market Committee (FOMC) meeting. The Minutes will show the divisions among the committee, but the event took place before a string of key labour and inflation figures that rattled markets and boosted hopes for a rate cut in September. In that sense, some of the views at that meeting might be outdated.
Technical Analysis: EUR/USD is testing the bottom of the weekly range at 1.1630
The EUR/USD pair was halted, once again, at the descending trendline from early July's highs, and is now testing the bottom of last week's trading range, at 1.1635. The 4-hour Relative Strength Index (RSI) has crossed below the 50 level, highlighting the growing bearish momentum.
A successful break of the August 14 low of 1.1630 would confirm that the uptrend from the August 1 low is over, and increase bearish pressure towards the 1.1590 area, which broadly aligns with the August 11 low, August 4 high, and the 38.6% Fibonacci retracement of the early August rally. Further down, the 50% Fibonacci retracement of the same cycle, at 1.1560, and the August 5 low at around 1.1530 are next.
To the upside, Tuesday's high, at 1.1690, might hold bulls ahead of the key trendline resistance from July 1 highs, now at 1.1715, and the August 13 high, at 1.1730.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.