Tariff Drama Continues. ECB Rate and U.S. NFP in Focus Next
EUR/USD Bounces Off Support: Sideways Movement on the Horizon
The Fed’s preferred inflation gauge showed last week that Trump’s tariffs are yet to have an effect on prices because at least until now, they have not climbed drastically. The U.S. Core PCE Price Index (month over month) posted a 0.1% change, exactly as anticipated.
The US Dollar was back in demand on Friday after more tariff drama earlier in the week. A U.S. Trade Court deemed the tariffs illegal and in violation of a law dated back in 1977. However, just a day later, a higher court (federal appeals court) ruled that the tariffs could stay in place, at least for now. But the greenback’s climb was more timid than the drop triggered by the overall uncertainty and EUR/USD had a back-and-forth week, finishing it almost where it started, despite the swings.
This week will be full of “landmines”, with the Euro and Dollar affected by major releases, including the European Central Bank interest rate decision and the U.S. Non-Farm Payrolls (NFP).
Economic Calendar Highlights
The first release of the week is scheduled for Monday at 2:00 pm GMT: the U.S. Manufacturing PMI. The index measures the overall level of business conditions in the Manufacturing sector, according to the opinions of purchasing managers from this sector.
Wednesday at 12:15 pm GMT we take a first look at the U.S. jobs situation with the release of the ADP Non-Farm Employment. This is a report that tries to mimic the government-issued NFP that comes out 2 days later; however, it does not garner the attention the NFP does. Later at 2:00 pm GMT, the USD will be affected by the release of the Services PMI.
The ECB is expected to cut the rate once again, from the current 2.40% to 2.15% and we will get a clear answer Thursday at 12:15 pm GMT. Half an hour later, ECB President Lagarde will hold the usual press conference.
The main event of the week will be the U.S. Non-Farm Payrolls (NFP) report, scheduled for Friday at 12:30 pm GMT. More often than not, this release dictates the next medium-term movement of the dollar because the Fed is closely watching the performance of the job market when deciding the next rate move. Thus far, employment has not raised major concerns, however, this time new job creation is expected to drop from the previous 177K to 130K.
Technical Outlook – EUR/USD
Last week the US Dollar bulls managed to take the pair down to the support at 1.1200 but failed to really challenge it and the price quickly rebounded in the 1.1380 area.
We will likely get some sideways price action until the heavyweight releases that are scheduled for later in the week (ECB rate and U.S. NFP). The bounce at 1.1200 shows there is still strength left in the Euro but on the other hand, the pair failed to print a new high so the uptrend is wavering.
A lot will depend on tariff news or rumors because, as we saw already, this can overshadow the technical aspect.
