The latest United States growth figures pressured EURUSD.
EURUSD found resistance near the 1.0950 level, and the price has been finding sellers at highs since June/July. If the price cannot sustain gains above 1.0850, then further losses are likely.
The euro suffered against the US dollar on Thursday after the latest economic data showed strength in the US economy. The latest GDP for the second quarter came in much higher than analysts’ expectations. A reading of 2.8% annual growth topped forecasts for 2% and boosted the dollar.
The dollar can gain further because its economy is still much more robust than Europe. The second element is that the Federal Reserve will be under less pressure to cut interest rates, while the European Central Bank is on a path to more cuts.
US central bank officials suggest that 1.8% is a non-inflationary growth rate. The US economy now outperforms its global peers despite harsh rate hikes from the Federal Reserve in 2022 and 2023. The economy remains supported by a resilient jobs market even as the unemployment rate has risen to a 2-1/2-year high of 4.1%.
However, the initial reaction to the figures has not swayed many traders to reduce their rate-cut bets.
“We’ve had a pretty solid set of US activity numbers today, but it isn’t having a major impact on market expectations for rate cuts, which are increasingly being seen as a done deal,” analysts at ING said.
“Consumer spending is set to slow further in the second half of the year (weak real disposable income growth, reduced support from pandemic-era savings, rising loan delinquencies as the cost of credit bites harder and harder), while the investment climate will also be more challenging with firms looking more cautious at the outlook (weakening hiring and capex intentions, while slowing home sales points to more weakness in residential construction),” they added.
The following data set to watch will be Friday’s PCE deflator release. That is not released until 8:30 pm HKT, but if it strengthens, we can expect a further unwind in the EURUSD next week.