Euro With A Tailwind
The U.S. dollar lost ground against the euro and British pound. The euro and British pound had a strong performance and showed an impressive run higher against the greenback last week. The EUR/USD managed to climb above 1.08 while the pound clinched in 1.28 by a strong bull candle. Also, bulls in the DAX got paid off as the index strongly rose above 18600, even though a correction followed after the sharp rise.
Weekly charts EUR/USD and GBP/USD:
As for last Friday’s nonfarm payrolls report, analysts expect that it is only a matter of a month or two before we see a drop in US employment which will be important for the Federal Reserve to kick off the rate-cut cycle. The U.S, payrolls report came in slightly better than average expectations but the overall picture of the labor market seems noticeably tighter than previously imagined. In short, the current report was moderately negative for the greenback.
The euro opened with a small gap today after the French elections results showed a surprise Left-Wing win. Market participants see a left-wing victory as euro-positive. Thus, the euro stabilized above 1.08, heading to close the opening gap.
This week, Fed Chair Jerome Powell will testify before the Senate Banking Committee on Tuesday and Wednesday. Any clear comments on the rate cycle path could drive the dollar but expectations are for 50bp worth of rate cuts in 2024.
On Thursday, the outcome of the U.S. CPI data could be even more important. A further slowdown in inflation will weigh on the U.S. dollar.
We entered the summer doldrums which is why we may face quieter trading conditions. Therefore, we will not invest much, trade with smaller positions and don’t trade every day.
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