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10 Jul 2023

EUR/USD sits at weekly highs above 1.0950 amid a quiet start to a big week

  • EUR/USD sustains Friday’s rebound to weekly highs through 1.0950.
  • Latest US jobs report pours cold water on hawkish Fed rate hike outlook.
  • Focus shifts to Germany’s ZEW survey and US CPI data this week.

EUR/USD is holding steady above 1.0950, sitting near eight-day highs of 1.0975 set on Friday. The pair is consolidating last week’s gains, in what seems to be a relatively quiet start to a big week ahead.

Investors digest Friday’s volatile trading activity, in response to the US labor market report, which fuelled further recovery in the EUR/USD pair from near the 1.0830 region. The main currency pair rose over a big figure on Friday after the US Dollar incurred heavy losses on disappointing US payrolls data. Non-farm payrolls for June came in at 209k versus a 225k estimate. Additionally, May and April NFPs saw a big downward revision, suggesting a cooldown in the job market.

The wage inflation data, represented by Average Hourly Earnings, was +0.4% in June against a +0.3% estimate and matched May's +0.4% which was revised upward from +0.3%. Following the US jobs data release, investors began to believe the Fed may not be as hawkish as expected, sending EUR/USD back toward 1.1000 at the expense of the US Dollar.

Markets are now pricing in roughly 70% odds of a Fed rate hike pause in September after the expected 25 basis points (bps) rate hike by the US central bank this month.

Meanwhile, mixed commentary from the European Central Bank (ECB) officials over the weekend, appears to be limiting the further upside in the Euro (EUR) for the time being. ECB Governing Council member Francois Villeroy de Galhau said, “Eurozone rates will soon reach their high point, but it will be more of a high plateau than a peak.” ECB Governing Council member and Bank of Portugal Governor, Mario Centeno, said that he expects Eurozone “inflation under 3% by the end of 2023.”

Next of note for traders remains the Chinese inflation data, which could have a significant impact on risk sentiment and the US Dollar valuations, in turn, influencing the EUR/USD price action. Also, in focus remains the Eurozone Sentix Investor Confidence data for July due later this Monday, in the absence of top-tier US economic data. This week’s Germany’s ZEW survey and US Consumer Price Index (CPI) will be closely followed by EUR/USD traders.

EUR/USD: Technical levels to watch

 

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According to the latest recommendation by the New Zealand Institute of Economic Research (NZIER) on Monday, the Reserve Bank of New Zealand (RBNZ) sho
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