An event to look out for today:
21:00 GMT+3. USD – FOMC decision on the key interest rate
EURUSD:
EUR/USD is trading around 1.0820 this morning. The main pair is declining amid risk-aversion and weaker-than-expected preliminary Q2 Gross Domestic Product (GDP) data from Germany. Traders are opting for a wait-and-see approach ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday.
Germany’s economy contracted again by 0.1% quarter-on-quarter in the second quarter after growing by 0.2% in the first quarter, the first estimate released by Destatis on Tuesday showed. The figure was weaker than the 0.1% increase expected. Meanwhile, annualized Gross Domestic Product (GDP) fell 0.1% in the second quarter, compared to a 0.2% contraction in the first quarter and a forecast of 0%. The euro (EUR) exerted some selling pressure amid weak German GDP data.
Nevertheless, the Eurozone economy grew 0.3% in the three months to the end of June, above the market consensus of 0.2% growth on a quarterly basis. Preliminary Eurozone inflation data and German retail sales will be released today. This data may provide some hints of a September rate cut by the European Central Bank (ECB).
Overseas, the Federal Reserve is expected to keep interest rates unchanged at its two-day meeting on Wednesday. However, markets widely expect the U.S. central bank to start easing policy at its next meeting in September as inflation is falling faster than anticipated in June. “At this point, a modest 25 basis point rate cut in September seems likely. If all goes well, we could even see two additional 25 basis point rate cuts before the end of 2024,” said Jacob Channel, chief economist at LendingTree.
Trading recommendation: Trade mainly with buy orders at the price level of 1.0860. We consider sell orders at the price level of 1.0795.
Origin: FreshForex
