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Trader Factor Market Analysis

Lagarde’s Remarks Boost EUR/GBP, but Momentum Fades

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EUR/GBP rebounds after four consecutive days of losses, supported by bets for additional rate hikes by the ECB.

The cross experienced a slight uptick near 0.8585-0.8580 on Thursday and climbed above the 0.8600 mark during the first half of the European session.

Although the intraday gains are modest, they add to the positive traction and reflect the shared currency’s recent surge.

The hawkish comments from ECB officials, including President Christine Lagarde, reaffirmed the case for additional rate hikes and assisted the EUR/GBP cross in gaining momentum.

Despite this, the latest Eurozone consumer inflation data came in softer than expected, causing some concern. HICP inflation fell from 7.0% YoY to 6.1% in May, missing estimates for 6.3%, while Core HICP inflation dropped to 5.3% YoY against forecasts of 5.5%.

The outlook for the cross is further affected by expectations for tighter policy from the Bank of England, which may support the British Pound.

With markets predicting the interest rate in the UK to reach 5.5% by autumn, caution is warranted before making any significant moves in the EUR/GBP cross.

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EUR/GBP Outlook

Stay ahead of market trends! Learn about the technical levels to watch on EUR/GBP. Today’s last price is 0.8604 with a daily change of 0.0012 (0.14%).

The daily open was 0.8592. Keep an eye on the daily SMA20, SMA50, SMA100, and SMA200 for the latest trends.

Previous daily, weekly, and monthly highs and lows are also important to note, as well as daily Fibonacci levels and pivot points.

ECB Official Warns That Rate-Cut Bets for 2024 May Need to Be Changed

Klaas Knot, a member of the European Central Bank’s Governing Council, gave a speech in Brussels where he cautioned that financial markets are already anticipating interest-rate cuts for next year, and these expectations may need to be revised.

Such adjustments could lead to new market corrections. Knot also points to the significance of carefully reevaluating liquidity buffers after the recent failure of SVB.

The Euro benefited from the hawkishness of Knot’s speech and rose against the US Dollar, reaching levels above 1.0700.

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The Dollar Loses Traction After A Rally

The US Dollar (USD) has lost its momentum following its strong performance against major currencies on Wednesday. The US Dollar Index, which measures the USD’s value against six major currencies, is retreating from its multi-month high above 104.50 towards 104.00.

Today’s release of the Automatic Data Processing (ADP) private employment data will affect the USD’s value. In addition, the labor costs revision and the ISM’s Manufacturing PMI survey for May will be closely monitored by investors.

Federal Reserve (Fed) officials’ comments about the rate hike at the upcoming FOMC meeting will also be important, as the probability of a rate hike decreased below 40% from nearly 70% early Wednesday.

Recent data shows the number of job openings on the last business day of April stood at 10.1 million, higher than expectations, giving the USD a short-lasting boost.

Meanwhile, consumer sentiment in the US slightly weakened in May, and house prices rose by 0.6% on a monthly basis in March.

The USD’s value is directly correlated with the Fed policy decisions regarding its two mandates for maximum employment and price stability.

If the policy is tight due to inflation concerns, interest rates will increase, reducing the money supply and increasing the USD’s value. Conversely, if the policy is loose because of a rising unemployment rate, the USD will lose its value.

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.