EURUSD:
The euro is trading around 1.1650 and remains under pressure due to persistently higher yields on dollar assets and the divergence in rhetoric between the Fed and the ECB. In the U.S., a “higher for longer” rate scenario persists amid the slow decline in core inflation and still robust consumer demand, which supports inflows into Treasuries and the dollar. Remarks from some Fed officials indicate that premature easing could destabilize progress on inflation, so the market maintains a premium for dollar rates.
In the euro area, the picture is softer: weak German industrial dynamics and downward revisions to growth and inflation forecasts reinforce expectations of further ECB easing over the coming months. The growth and yield differential continues to work against the euro, especially against the backdrop of a widening negative real-rate spread. Additional pressure comes from sluggish credit demand and companies’ cautious investment stance amid geopolitical uncertainty and high energy costs.
Fiscal debates in key eurozone economies increase the risk premium, whereas the U.S. shows more resilient macro dynamics: retail sales and the labor market remain strong enough to support the dollar. Taken together, this cements a fundamentally bearish tilt for EURUSD in the short term until signs appear of an accelerated U.S. cooldown or more hawkish signals from the ECB.
Trade idea: SELL 1.1650, SL 1.1670, TP 1.1550
Origin: FreshForex
