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Euro could attempt some consolidation ahead of further gains – Crypto News

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  • Euro keeps the narrow trading range in multi-week tops.
  • Stocks markets in Europe maintain the optimism post-ECB.
  • The appetite for the risk complex remains favored on Friday.
  • ECB’s J. Nagel and B. Vasle advocated for an extra hike in the summer.
  • The EMU Final Inflation Rate matched the preliminary readings.
  • US Flash Consumer Sentiment and Fedspeak comes later in the session.

The European currency (EUR) keeps its narrow trading range in the area of ​​5-week highs vs. the Greenback on Friday. A potential move to the psychological 1.1000 hurdle appears, so far, elusive for EUR/USD,

In the meantime, risk appetite Trends appear somewhat divided as investors continue to adjust to Thursday’s hawkish message from the ECB, after the central bank walked the talk and raised rates by 25 bps and signaled that more is coming at the July meeting.

On the latter, ECB Board members Joachim Nagel and Bostjan Vasle advocated earlier in the European morning for an extra 25 bps rate hike in the summer, a view that falls in line with President Christine Lagarde’s comments on Thursday.

Back at the ECB event, the bank’s rate increases were underscored during the press conference, where President Lagarde devoted a significant amount of time emphasizing factors that contribute to inflation growth, such as robust wage increases, improved profit margins, and high expectations of inflation. Although potential risks to economic growth and stricter financial conditions were acknowledged, the primary message conveyed by the ECB today was its commitment to maintain the upward trajectory of interest rates. As Lagarde mentioned, the ECB has no intention of considering a pause at the moment.

The domestic calendar confirmed that disinflationary pressures remained well in place in the euro area in May, despite inflation remaining far from the ECB’s target. On this basis, the headline CPI rose at an annualized 6.1% during the last month and 5.3% when it comes to core prices (excluding costs for energy and food).

Across the Atlantic, the advanced Michigan Consumer Sentiment gauge will be the salient release across the pond, along with speeches by St. Louise fed James Bullard (2025 voter, hawk) and FOMC’s Christopher Waller (permanent voter, hawk).

Daily digest market movers: Euro now sets its sights on the 1.1000 barrier

  • The US Dollar attempts a tepid bounce and encourages the USD Index (DXY) to put some distance from earlier multi-week lows near 102.00.
  • US and German yields lose some momentum, although their inversions keep signaling the likelihood of a recession in the coming months.
  • It seems that a continuous decrease in the Greenback is not certain after the FOMC event on Wednesday, as the Committee plans to resume increasing interest rates, potentially starting as early as July and Jerome Powell clarified that the decision not to increase rates at the current meeting was not a “skip”.
  • EMU Final inflation figures coincided with the flash prints in May.
  • Consensus expects a slight improvement in US Consumer Sentiment in June, while the resumption of the hawkish narrative should not be ruled out when C. Waller speaks later in the session.

Technical Analysis: Euro faces a key hurdle at 1.1000

Euro (EUR) printed a new monthly high at 1.0962 on June 16. Further gains need to rapidly clear this level to allow for a potential move to the psychological 1.1000 hurdle. North from here, the pair could challenge the 2023 high at 1.1095 (April 26), which is closely followed by the round level of 1.1100 and comes ahead of the weekly top of 1.1184 (March 31, 2022). In addition, the latter appears propped up by the proximity of the 200-week SMA, today at 1.1182.

In case bears regain the initiative, there are no contention levels of significance until the May low of 1.0635 (May 31). The breach of this level could sponsor a deeper decline to the March low of 1.0516 (March 15) seconded by the 2023 low at 1.0481 (January 6).

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB’s primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative Tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

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