Euro about to mark weekly loss amid negative pressures

The euro rose in the European market on Friday against a basket of global currencies, attempting to recover from a three-week low against the US dollar, supported by notable buying activity from lower levels.

Despite this rebound, the single currency is heading toward its first weekly loss in a month, amid growing negative pressure, especially the broad strength of the US dollar driven by strong economic data and cautious remarks from Federal Reserve officials.

Price Overview

• EUR/USD rose by about 0.15% to $1.1682, from today’s opening level of $1.1665, after touching a low of $1.1657.

• The euro ended Thursday’s session down 0.6% against the dollar, its second consecutive daily loss, hitting a three-week low at $1.1645 following strong US economic data.

Weekly Trading

Over the course of this week, which officially concludes at today’s settlement, the euro is down about 0.55% against the US dollar, on track for its first weekly loss in a month.

US Dollar

The dollar index fell by about 0.1% on Friday, retreating from a three-week high of 98.61 points, reflecting a pause in the US currency’s advance against a basket of major currencies.

Beyond profit-taking and corrective moves, the US dollar is retreating within a narrow range, as investors refrain from building new long positions ahead of the release of the US Personal Consumption Expenditures (PCE) monthly report.

The greenback remains on track for its biggest weekly gain in two months, as it continues to attract strong buying as the best available investment, supported by upbeat US economic data and cautious Fed commentary.

The latest data showed that the US economy grew in the second quarter at its fastest pace in two years, beating market expectations, while weekly jobless claims came in well below estimates.

Following the data, and according to the CME FedWatch tool, the probability of a 25-basis-point Fed rate cut in October fell from 92% to 88%, while the probability of leaving rates unchanged rose from 8% to 12%.

European Interest Rates

• Sources said ECB policymakers believe no further rate cuts are needed to achieve the 2% inflation target, despite new economic forecasts suggesting lower rates over the next two years.

• Sources added that unless the eurozone suffers another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Money market pricing for a 25-basis-point ECB rate cut in October is currently steady at around 10%.

• Traders have scaled back bets on additional ECB easing, indicating the rate-cut cycle may be over for this year.

• To reprice those expectations, investors in the coming period are awaiting a series of European economic data releases, as well as commentary from ECB officials.