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Euro News Today - EUR/USD has hit a four-week low of 1.0740 during the Asian trading session. The major currency pair is experiencing significant selling pressure as the market mood remains cautious. Today's forex news regarding EUR/USD will be discussed directly and based on technical analysis from the FxStreet.com site.
Market sentiment has turned negative as investors worry that the delay in the US debt ceiling issue will continue, which could force the US economy to default on its obligations. S&P500 futures maintained significant gains after the start of the Tokyo session, fueled by dovish minutes from the Federal Open Market Committee (FOMC). The majority of Federal Reserve (Fed) policymakers expect to temporarily refrain from tightening policy due to the tight credit situation at US regional banks. However, the overall market mood will remain cautious about risks until there is a bipartisan agreement between the White House and Republican leaders. The US Dollar Index (DXY) quickly rose above 104.00 and hit its highest level in the last two months, as the potential for a US economic default due to disagreements on raising the US debt ceiling, which could have disastrous consequences, increased its appeal. Fears of a US default further weakened demand for US government bonds, resulting in a significant spike in the 10-year US Treasury yield, reaching over 3.74%. A Federal Reserve rate hike in June seems uncertain. After 10 consecutive rate hikes by the Federal Reserve, the likelihood of a pause in rate hikes has increased. The FOMC minutes released late on Wednesday showed that several Federal Reserve policymakers recommended a pause after the May rate hike, given the turmoil in the banking sector. Bankruptcy announcements by several US banks have prompted regional banks to significantly increase their credit requirements to avoid a buildup of Non-Performing Assets (NPAs). The impact has been a serious deterioration in lending to households and businesses. In his speech last week, Federal Reserve Chairman Jerome Powell also suggested a pause in rate hikes as increased scrutiny of banks’ credit distribution has put significant pressure on inflationary pressures. US Durable Goods Orders have been in the spotlight after the release of the dovish DOMC minutes, and investors are now anticipating the release of US Durable Goods Orders data on Friday. According to the preliminary report, Durable Goods Orders contracted by 1.0% in April compared to a 3.2% growth previously. The contraction in economic data suggests weak demand, which is likely to have an impact on the US Consumer Price Index (CPI). Investors should note that the US economy is facing a more persistent core inflation challenge than the headline price index. A contraction in demand for durable goods could dampen core inflation pressures and act as a comfort factor for the Federal Reserve. In the eurozone, near stagnation as higher interest rates imposed by the European Central Bank (ECB) have taken a toll on the economic outlook. The manufacturing sector is under particularly high pressure and has contracted significantly. Analysts at Commerzbank cited that an interest rate hike by the ECB would have a negative impact on the eurozone economy at some point. This means that dovish members on the ECB’s board are likely to dominate, with the euro losing important support. In addition, Economist Klaus Wohlrabe in the German IFO Business Survey stated that the German economy is heading for stagnation in the second quarter as higher interest rates dampen overall demand.
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