EUR/USD fluctuates within range with Ukraine, US inflation on tap
- The Euro gives away previous gains with trading at low volumes and all eyes on Ukraine.
- A moderate risk-on mood is weighing on the US Dollar, with US CPI and the US-China trade talks in focus.
- EUR/USD consolidates gains, but the 1.1700-1.1710 area is likely to cap bulls.
The EUR/USD has given away previous gains and is practically flat on the daily chart, with price action moving at 1.1640 ahead of the US Session opening. A mild appetite for risk prevails in a dozy start of the week, with US Consumer Prices Index (CPI) figures and the peace talks between US and Russia grabbing traders’ attention.
Hopes of a peace deal in Ukraine, ahead of a meeting between US President Donald Trump and his Russian counterpart Vladimir Putin, pose further support for the common currency, as European leaders put pressure to include Ukrainian President Volodymyr Zelensky in the talks.
In the Eurozone. Italian consumer inflation confirmed the preliminary expectations of some moderation on price pressures, while the trade surplus narrowed against expectations.
The US calendar is void today, and the focus is on July’s CPI data, due on Tuesday. US inflation is expected to have accelerated further, and might prompt investors to reassess their monetary policy expectations for the coming months. In that sense, these expectations might have a significant impact on most US Dollar crosses.
Meanwhile, US and Chinese representatives keep negotiating to find a way to avoid hefty reciprocal tariffs, with the August 12 deadline looming large. The main issue seems to be the US restrictions on exports of AI chips, but the market is pricing some sort of deal that will allow for an extension of the trade truce.
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 | 0.04% | -0.01% | 0.10% | 0.12% | 0.07% | 0.30% | 0.14% | |
| EUR | -0.04% | -0.05% | 0.07% | 0.09% | 0.04% | 0.21% | 0.11% | |
| GBP | 0.01% | 0.05% | 0.10% | 0.15% | 0.09% | 0.27% | 0.17% | |
| JPY | -0.10% | -0.07% | -0.10% | 0.05% | -0.00% | 0.25% | 0.18% | |
| CAD | -0.12% | -0.09% | -0.15% | -0.05% | -0.04% | 0.12% | -0.00% | |
| AUD | -0.07% | -0.04% | -0.09% | 0.00% | 0.04% | 0.18% | 0.07% | |
| NZD | -0.30% | -0.21% | -0.27% | -0.25% | -0.12% | -0.18% | -0.10% | |
| CHF | -0.14% | -0.11% | -0.17% | -0.18% | 0.00% | -0.07% | 0.10% |
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: Rangebound trading in a holiday market
- Most currencies are moving in range on Monday, with volumes at low levels. Japanese markets are closed for holidays. The US Dollar (USD) Index, which measures the value of the Greenback against the most traded currencies, is showing a moderate weakness, trapped within the previous two trading days’ ranges.
- In the Eurozone Calendar, the final Italian Consumer Price Index release confirmed the preliminary figures of a 1% contraction in July and that the yearly CPI eased to 1.7% from 1.8% in June.
- Furthermore, Italian trade surplus narrowed to EUR 5.40 billion in June from EUR 6.10 billion in May instead of increasing to 7.12 billion as the market forecasts had anticipated.
- Investors are likely to look from the sidelines ahead of the release of the US consumer inflation report on Tuesday. US prices are expected to have accelerated to a 2.8% year-on-year rate in July, from 2.7% in June and 2.4% in May. Likewise, the core CPI is seen returning to a 3% yearly inflation from 2.9% in the previous month. The risk is on the upside for the US Dollar, as higher-than-expected CPI figures will raise concerns about the impact of tariffs and cool expectations of a Federal Reserve (Fed) rate cut in September.
Technical Analysis: EUR/USD consolidates gains below 1.1700
EUR/USD rally from 1.1400 lows found resistance at 1.1700 last week and has been consolidating gains since, with downside attempts limited above the 1.1635 area. Technical indicators show a weakening bullish momentum, but the Relative Strength Index (RSI) remains above the 50 level. The Dollar Index is on the defensive, which is contributing to underpin the Euro.
Intraday highs are at 1.1675, but, in the current market context, there is scope for further appreciation to the 1.1700-1.1710 area, where the 78.6% Fibonacci retracement of the late-July sell-off meets July 23 and 25 lows. Further up, the descending trendline from early July highs, now at 1.1740, is expected to pose a significant challenge for bulls.
Alternatively, a bearish reaction might find support at Friday’s lows of 1.1630, ahead of the previous resistance area at 1.1595, which aligns with the August 3 and 5 highs. Below here, the August 5 low at around 1.1530 would come into focus.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.