EURUSD loses 0.8% 📌

Strong macro data from the United States and a conference by Christine Lagarde, who despite hawkish stance didn't rule out a pause at current levels after the ECB's 25bp rate hike, imposed downward pressure on the EURUSD.

• US labor market and GDP data came in well above expectations. Claims came in at 221k versus an expected increase to 235k from the previous 228k. The reading was also accompanied by a completely unexpected drop in continuing claims to 1.69 million versus 1.75 million previously. The strong reading may also herald a positive NFP surprise. U.S. Q2 GDP significantly beat forecasts and indicated 2.4% vs. 2% previously and 1.8% growth forecast, analysts had expected a decline. Also US Durable Goods reading came in 4,7% vs 1,3% expected and 1,8% previously. The U.S. economy showed tremendous strength and remains strong despite a record cycle of Fed rate hikes in more than 40 years. Ultimately, it could translate into a longer, hawkish Federal Reserve policy.
• The second factor weakening the euro against the US dollar was comments made by President Lagarde, who commented on today's ECB decision. As the Bank's head admonished, at this point there are no forecasts for a hike (or pause) in September, nevertheless it does not appear that the ECB has much further to go in terms of tightening the economy. The impact of the hikes to date is becoming more apparent, but elements of risk are still present, especially when it comes to core inflation. The money market now assumes that the ECB will raise rates by 25 bps at its September meeting with a probability of just under 40%.

The EURUSD pair is breaking out below the psychological barrier of 1.1000 in the face of very good US data and dovish comments from President Lagarde. Source: xStation 5