EURUSD rebound appears elusive ahead of EU/US PMI data

US Dollar ignored Thursday’s unimpressive data to post the biggest daily jump in a week as the return of the full markets welcomed hawkish statements from the Federal Reserve (Fed) officials. However, the Greenback bulls take a breather early Friday ahead of the preliminary readings of June’s PMIs from the top-tier economies.

It’s worth noting, however, that the interest rate futures suggest the traders’ bets on the Fed’s two rate cuts during 2024 versus only one signaled via the latest dot plot projections from the policymakers, which in turn keeps the US Dollar on the way to posting a third consecutive weekly gain.

That said, EURUSD picks up bids to reverse the previous day’s losses amid hopes of witnessing upbeat activity data from Germany and the Eurozone. On the same line, GBPUSD also pares the weekly losses on upbeat UK Retail Sales and positive expectations from British PMI data for June. Further, USDJPY braces for a consecutive second weekly gain despite lacking upside momentum at a seven-week high as mixed inflation clues and PMIs from Japan challenge hawkish bias about the Bank of Japan (BoJ).

AUDUSD ignores softer Aussie PMIs to brace for the second weekly gain in a row while posting the highest gains among the G10 currency pairs whereas NZDUSD follows the suit despite lacking major catalysts at home. Moving on, USDCAD prints a six-day losing streak while falling to the lowest level in a fortnight on firmer crude oil prices whereas USDCHF pares the biggest daily gain in a month, backed by the Swiss National Bank’s (SNB) rate cut, as traders prepare for a busy day ahead.

Gold buyers keep the reins at the highest level in two weeks after crossing the key upside hurdle, now immediate support surrounding $2,345, as the US Dollar bulls lack conviction and the global markets appear divided over the major central banks’ next interest rate moves.

BTCUSD remains on the back foot for the fifth consecutive day and ETHUSD also holds lower grounds as the German government’s Bitcoin sale joins the news of a security breach in a few crypto networks. The same pushes the US SEC to justify its hardline stand for these cryptocurrencies and challenge the optimism surrounding the spot ETF approvals.

Following are the latest moves of the key assets:

• WTI Crude oil remains mildly bid at a seven-week high, up 0.14% intraday near $81.30 at the latest.
• Gold stays defensive near $2,360 after rising the most in a week the previous day.
• The USD Index struggles to defend the previous day’s gains while retreating to 105.55 as we write.
• Wall Street closed mixed but the Asia-Pacific shares edged lower of late. That said, equities in British and Europe remain indecisive during the initial trading hour.
• BTCUSD and ETHUSD both remain pressured near $64,500 and $3,510 respectively as we write.

US Dollar braces for another weekly upside despite mixed data…

On Thursday, downbeat prints of the US Jobless Claims, Philadelphia Fed Manufacturing Index, housing market numbers, and the Q1 Current Account failed to stop the US Dollar Index (DXY) from posting the biggest daily jump in a week as most of the Fed officials push back rate cut hopes. Among them, Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari gained major attention as both policymakers rejected chances of witnessing rate cuts unless witnessing a clear sign of declining inflation. Apart from the hawkish Fed chatters, upbeat comments from US Treasury Secretary Janet Yellen and fears surrounding China also allowed the Greenback to brace for the third consecutive weekly gain.

While the US data failed to impress the Greenback sellers amid full markets, the EURUSD dropped heavily as softer Eurozone Consumer Confidence for June superseded the European Central Bank (ECB) officials’ promotion of hawkish policy. On the other hand, the Bank of England’s (BoE) hawkish halt and strong UK Retail Sales allow GBPUSD to stay on the front foot while USDJPY lacks conviction on intraday as Japan’s Consumer Price Index (CPI) for May and activity data for June challenge the BoJ rate hike chatters.

AUDUSD ignores downbeat Aussie PMIs for June as Reserve Bank of Australia (RBA) updates pushed back the rate cut bias. Also underpinning the Aussie pair’s run-up are firm expectations of China’s more stimulus. The same allows NZDUSD to reverse the previous day’s losses despite lacking any major catalysts at home. Further, USDCAD prints a six-day losing streak despite the Bank of Canada’s (BoC) dovish bias as Crude Oil, Canada’s biggest export item, rises to a seven-week high on unexpected inventory draw and expectations of witnessing higher energy demand from China.

It should be noted that the former Fed Governor and White House (WH) Economic Adviser Lael Brainard appears optimistic about witnessing further inflation slowdown and hence signals the need for lower rates, which in turn challenge the US Dollar bulls ahead of today’s PMIs. The same joins the market’s anxiety about the macroeconomic environment and sluggish yields to propel the Gold price.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

PMIs in focus…

Having witnessed mostly mixed activity data from Australia and Japan, the preliminary PMIs for June from Germany, the Eurozone, the UK, and the US will be crucial to watch for intraday directions. Also important will be Canada Retail Sales.

Given the latest market consensus suggesting a wider divergence between the Fed and the other central banks, as far as the interest rate actions are concerned, a likely improvement in today’s US PMIs and Existing Home Sales may allow the Greenback to end the week on a positive side. The same could challenge the latest advances in Crude Oil and Gold, as well as exert downside pressure on the EURUSD.

May the trading luck be with you!