EUR/USD lost monthly growth in 3 days

02/07/2023

1 minute read

2023.02.07 13:05

The euro has lost ground for the past three sessions, and its losses continued on Tuesday. fell below the 1.07 line for the first time since January 23 earlier in the day.

This week, German and eurozone data have been weak, putting more pressure on the euro. In December, the Eurozone saw a decline of 2.7%, which was lower than the estimate of -2.5% and well below the November reading of 1.2%. came in at -3.2% in December, which was lower than the expected -0.6% and was down from 0.4 percent in November.

Although Germany is the bloc’s locomotive, the engine is stuttering, which is detrimental to the rest of the eurozone. Retail sales for December fell by 5.3%, and the Manufacturing PMI remains in contraction territory. GDP shrank by 0.2% in the fourth quarter.

The nonfarm payroll report in January provided the much-needed boost, as the 517,000 increase surpassed expectations. Although Fed Chair Powell will participate in a panel discussion, there are no significant US releases today.

The US dollar may extend its gains if Powell speaks hawkishly. This week, a number of Fed members will speak, and the US dollar may continue to move north if they reiterate the Fed’s “higher for longer” stance.

What kind of reaction will the Fed have to the excellent employment report? Mary Daly, a member of the Fed, referred to the employment release as a “wow number” and described the December forecast of a peak rate of 5.1 percent as a “good indicator” of Fed policy.

We’re likely to see two more rate hikes with the benchmark rate currently hovering between 4.5 percent and 4.75%, as Jerome Powell stated during the FOMC meeting last week. There is even talk on Wall Street of a “no landing,” which would mean that a recession could be avoided, due to the surge in job creation. These developments have raised hopes that the Fed will be able to carry out a “soft landing.”