empty
20.08.2024 12:52 AM
The Higher the Euro Goes, the More Cautious It Becomes

Everything is relative. If inflation is no longer of particular interest to financial markets, they have focused on the recession, but for politicians, it still is. Donald Trump continuously criticizes the Democrats for high inflation. It must be acknowledged that the Republican has a point—prices did indeed soar in 2022 and 2023. However, the former President's promises to bring them down to the level of a grain of sand are not very credible.

Trump's plan involves increasing oil production, which would then affect gasoline prices, save Americans money, and allow them to invest elsewhere. However, in reality, energy prices no longer have the significant impact on the CPI that they once did. Combating inflation requires something else—something that monetary policy from the Federal Reserve can influence.

Dynamics and Structure of American Inflation

This image is no longer relevant

Thus, if Trump intends to increase oil production while simultaneously pressuring the Federal Reserve to sharply lower interest rates, nothing substantial will result. Meanwhile, Fed Chair Jerome Powell and his team are preparing to announce the start of a monetary easing cycle in September, with Jackson Hole as the ideal venue for this announcement.

The market already expects the Fed to begin easing its monetary policy within the first month of autumn. Therefore, if Powell refuses to give hints, we should anticipate US stock indices and EUR/USD sell-offs. The only leverage the bears have on the main currency pair is the silence of the Fed chair and concerns about Trump coming to power.

Despite the weakness of the eurozone economy, positive developments elsewhere, including in the UK, Japan, China, and the US, extend a helping hand to the euro as a pro-cyclical currency. It reacts sharply to the recovery of the global economy, even if led by the US. I don't think the European business activity figures will significantly deviate from Bloomberg's expert forecasts in a way that would negatively impact EUR/USD. Minor discrepancies allow for purchasing the main currency pair on price dips.

This image is no longer relevant

Another important event of the week will occur at the midpoint of the week, in addition to Jackson Hole and the release of the Eurozone PMI data. This concerns the release of the minutes from the July FOMC meeting. At that meeting, the Fed decided to keep the federal funds rate at a plateau of 5.5%, but a change in rhetoric caused investors to become concerned. What exactly did the central bank mean? Investors will try to extract the answer from the minutes.

Technically, the long positions formed from the 1.1 level in EUR/USD appear shaky on the daily chart. A rebound from the pivot levels at 1.1065 and 1.1110, or the bulls' inability to hold the upper boundary of the fair value range of 1.0845–1.1040, will be grounds for selling.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Dollar and Stock Market Crash Continues (AUD/USD May Keep Rising While USD/JPY Declines Further)

While Europe and parts of Asia continue celebrating Easter and political life has temporarily paused, in the U.S., the "Make America Great Again" trend set by Donald Trump continues

Pati Gani 09:04 2025-04-21 UTC+2

What to Pay Attention to on April 21? A Breakdown of Fundamental Events for Beginners

No macroeconomic events are scheduled for Monday—not in the U.S., the Eurozone, Germany, or the U.K. Therefore, even if the market was paying attention to the macroeconomic backdrop, today, there

Paolo Greco 06:30 2025-04-21 UTC+2

GBP/USD Overview – April 21: The Inertial Growth Continues

The GBP/USD currency pair continued its upward movement on Friday. If we had seen such price action away from peak levels, there would have been no questions. In essence

Paolo Greco 04:01 2025-04-21 UTC+2

EUR/USD Overview – April 21: The Market Sleeps, Only Trump Can Wake It Up

On Friday, the EUR/USD currency pair made no notable movements whatsoever. This was unsurprising, as Friday marked Good Friday, and Sunday was Easter. Many banks and trading venues were closed

Paolo Greco 04:01 2025-04-21 UTC+2

US Dollar: Weekly Preview

Is there light at the end of the tunnel? The US dollar will again try to answer that question in the new week. To briefly recap: over the past

Chin Zhao 01:01 2025-04-21 UTC+2

British Pound: Weekly Preview

Several fairly interesting reports were released in the UK, but they almost did not impact market participants' actions. Demand for the British pound increased on all five days except

Chin Zhao 01:01 2025-04-21 UTC+2

Euro: Weekly Preview

There were very few changes regarding the euro last week. We observed horizontal movement for most of the week, which naturally did not affect the current wave markup. I want

Chin Zhao 01:00 2025-04-21 UTC+2

Trump targets Powell

Yesterday, US President Donald Trump stated that he could dismiss Federal Reserve Chairman Jerome Powell, casting doubt on the idea of central bank independence. He also expressed frustration that policymakers

Jakub Novak 14:42 2025-04-18 UTC+2

EU increases pressure on US

The entire world is now watching the ongoing negotiations between the US and its key trading partners. Despite President Trump's loud claims that the talks are going well, there

Jakub Novak 14:04 2025-04-18 UTC+2

The Market Taken Hostage

Will the White House cross the Rubicon by initiating the dismissal of Jerome Powell from his position as Chair of the Federal Reserve? That would deal another blow to financial

Marek Petkovich 09:16 2025-04-18 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.