Euro bounces off one-week low, holds above 1.1500 vs USD as traders look to US PPI
The EUR/USD pair drops to a one-and-a-half-week low during the first half of the European session, though it manages to recover a few pips from the vicinity of the 1.1500 psychological mark.
The EUR/USD exchange rate temporarily reached its lowest point in a week, but managed to surpass the 1.1500 mark. Traders are focusing on the US Producer Price Index (PPI) as they consider the possibility of a US Federal Reserve rate increase later in the year. The absence of a positive surprise from the US Consumer Price Index (CPI) has lessened concerns about potential interest rate hikes by the Federal Reserve.
However, the US Dollar strengthened due to fears that higher energy prices could reignite inflation. This factor lifted the USD to a two-week high and put some pressure on the EUR/USD pair. Iran's attacks on shipping vessels in the Red Sea and Bab el-Mandeb Strait have further increased war-risk premiums, benefiting crude oil prices and the safe-haven USD.
The European Central Bank (ECB) is also likely to raise interest rates by 25 basis points at its upcoming meeting in September, according to market expectations. Analysts at HSBC highlight divergent policy challenges among major central banks, with the ECB expected to continue tightening monetary policy, while other major central banks face more complex trade-offs between inflation concerns and avoiding over-tightening.
In technical analysis, the EUR/USD pair remains above the 200-period Simple Moving Average (SMA) at 1.1451, providing a floor for the pair. Momentum indicators, such as the Relative Strength Index and Moving Average Convergence Divergence (MACD), suggest limited buying pressure and tentative upside potential.
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