EUR/USD unable to hold above 1.0200, tumbles to 1.0160s despite mediocre US data

• EUR/USD falls due to weaker than expected EU economic data, facing strong headwinds with the energy crisis, and slower economic growth.
• US GDP in the second quarter showed signs of contraction, meaning the US is in a “technical recession.”
• Inflation in Germany tops around 8.6% YoY, while the EU’s economic sentiment plunges.

The EUR/USD drops from daily highs above 1.0200, trimming some of Wednesday’s gains. On Wednesday, the market perceived a slightly “dovish” tilt of Fed Chair Jerome Powell as that, so most G8 currencies rallied vs. the greenback. Additionally, the US economy getting into a “technical recession,” as the US Department of Commerce reported, would keep the greenback pressured.

The EUR/USD is trading at 1.0170 after hitting a daily high at 1.0234, but tumbled on worst-than-expected EU Economic sentiment & Consumer confidence figures, plunging towards the daily low of 1.0114, before bouncing on dismal US economic data.

EUR/USD, unable to capitalize on a soft US Dollar, could fall further

Sentiment remains positive and would likely end in that way. Data from the US Department of Commerce showed that US GDP in the second quarter shrank 0.9%, less than the forecasted 0.4% growth. That said, alongside money market futures pricing a less “hawkish” Fed than previously estimated, with odds of a 75 bps rate hike in September at 78%.

At the same time, the US Department of Labor reported that the US Initial Jobless Claims for the week ending on July 23 increased by 256K, more than the 253K estimated. Nevertheless, fell compared to the week ending on July 16, which printed 261K.

Elsewhere, the US Dollar Index is almost flat at 106.473 after reaching a daily high at 106.975. US Treasury yields are also down, led by the US 10-year benchmark note coupon diving ten bps, sitting at 2.680%.

In the Europe session, inflation in Germany rose unexpectedly in June, with the HICP increasing by 8.5%, higher than estimations and smashing the previous figure of 8.3%. In non-harmonized estimations, inflation in Germany fell slightly to 7.5%, from the prior reading of 7.6%.

Earlier, the EU Economic sentiment plunged to 99 in July, lower than estimations of 102. In the same tone, the EU Consumer confidence tumbled -27.0 vs. -23.8 in June.

What to watch

On Friday, the EU economic docket will feature Eurozone, France, Italy, and Spain’s GDP Growth and inflation readings. That is alongside Germany’s employment data and GDP Growth. On the US front, the calendar will feature the core and headline PCE Price Index for June, the Chicago PMI, and the University of Michigan Consumer Sentiment for July.

EUR/USD Key Technical Levels