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MTrading Team • 2024-05-17

EURUSD pares weekly gains as ECB officials confirm June rate cut

EURUSD pares weekly gains as ECB officials confirm June rate cut

Traders consolidate the weekly momentum amid a light calendar and the absence of impressive news early Friday. This allows the US Dollar to extend the previous day’s rebound from the monthly low and challenge the week’s gains of the major currencies and Antipodeans. Apart from that, fears surrounding China also allowed the Greenback to pare weekly losses.

With this, EURUSD and GBPUSD extend the previous day’s retreat from their respective highs in eight weeks while USDJPY defends recovery from a two-week low. Further, AUDUSD eases from the highest level in four months whereas NZDUSD justifies the previous day’s bearish Doji print intraday losses.

USDCAD fails to cheer mild gains of Canada’s main export item, namely crude oil, whereas Gold price picks up bids to reverse Thursday’s pullback from one-month-old horizontal resistance.

Elsewhere, BTCUSD prints mild gains after easing from the monthly high amid chatters on the CME’s planning to introduce Bitcoin trading but the ETHUSD lacks recovery momentum on mixed headlines surrounding spot ETH ETFs.

Following are the latest moves of the key assets:

  • WTI Crude oil braces for the biggest weekly gains in four by posting mild gains around $79.10 by the press time.
  • Gold reverses the previous day’s losses while rising back toward the monthly high near $2,400, close to $2,385 at the latest.
  • The USD Index defends Thursday’s recovery from a monthly low near 104.60 as we write.
  • Wall Street closed with minor losses and allowed the Asia-Pacific shares to pare weekly gains. However, British and European shares remain lackluster during the initial trading hour.
  • BTCUSD and ETHUSD print mild gains to pare the previous day’s losses near $65,900 and $2,950 at the latest.
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Market’s consolidation continues…

US Dollar Index (DXY) posted the first daily gains in four the previous day while bouncing off the lowest level in five weeks, as well as recovering from the 100-SMA, despite unimpressive US data. That said, the DXY remains mildly bid during early Friday but stays on the way to posting the weekly loss. In doing so, the Greenback’s gauge versus the six major currencies cheers hawkish commentary from the Federal Reserve (Fed) officials and the risk-negative headlines from China amid a sluggish trading day so far.

On Thursday, the US Jobless Claims, Industrial Production and housing releases printed mostly downbeat outcomes. However, the Fed officials kept pushing back the rate cuts and allowed the DXY to rebound from the monthly low. Among the key FOMC officials, Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester and Federal Reserve Bank of Richmond President Thomas Barkin gained major attention as all of them ruled out the market’s concerns that the recent weakness in the US CPI pushed the Fed toward frequent rate cuts in 2024.

Elsewhere, China reported upbeat Industrial Production growth but the disappointing housing market and fixed asset data joined slower Retail Sales growth to renew fears about the world’s second-biggest economy, which in turn challenged buyers of the commodities and Antipodeans while also underpinning the US Dollar’s rebound.

While the Fed concerns and China news allowed the Greenback to pare weekly gains, Euro bulls take a breather as almost all of the European Central Bank (ECB) officials who recently crossed wires confirmed the June rate cut. That said, ECB executive board member Isabel Schnabel said that the June rate cut may be appropriate, path after is much more uncertain. On the same line, ECB Governing Council Member Martins Kazaks also mentioned, “The first rate cut likely in June, but spaced out after that.”

On the other hand, an indecision among the Bank of England (BoE) officials to support the market’s rate cut bias triggered the GBPUSD pair’s retreat. As per the latest Reuters poll, the BoE’s rate cut in June versus August is a close call. Further, BOE policymaker Megan Greene also said that the burden of proof lies in inflation persistence continuing to wane.

It should be observed that Bank of Japan (BoJ) Kazuo Ueda ruled out market speculations suggesting the Japanese central bank’s plan to offload ETF holdings to defend the Yen. The same, however, failed to defend the JPY amid broad concerns challenging the BoJ’s rate hikes and mixed data from the Asian major.

AUDUSD and NZDUSD bear the burden of China headlines while crude oil recovers amid hopes of witnessing more energy demand from China, due to a likely increase in stimulus from the Dragon Nation, as well as amid hopes of witnessing further supply cuts from the OPEC+. Moving on, Gold price remains on the front foot as uncertainty about major central banks’ next moves and broadly weaker yields direct traders toward the traditional safe-haven.

  • Strong buy: USDCAD, USDJPY, US Dollar
  • Strong sell: AUDUSD, NZDUSD, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

EU inflation, Fed talks eyed…

The economic calendar doesn’t hold anything important to move the markets much on Friday, the final readings of the Eurozone inflation data for April and a slew of Fed policymakers’ speeches could entertain the momentum traders. It should be observed that Sunday’s public appearance of Fed Chair Jerome Powell will be closely watched after the FOMC leader failed to impress US Dollar bulls despite pushing back June rate cut concerns.

May the trading luck be with you!