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Euro extends gains, hits new high for 2024

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The euro rally has run out of steam on Tuesday after rallying 1% over the past two days. In the North American session, EUR/USD is trading at 1.1110, up 0.22% on the day at the time of writing. Earlier, the euro hit 1.1116, its highest level this year.

Eurozone CPI ticks higher to 2.6%

The annual inflation rate in the eurozone climbed to 2.6% in July, up from 2.5% in June and confirming the preliminary estimate. This was above the initial market estimate of 2.4%. The increase in CPI was driven by a sharp rise in energy costs, while food inflation slowed slightly. Monthly, CPI declined to zero, down from 0.2% and in line with expectations. Core CPI was unchanged at 2.9%, above the initial market expectations of 2.8%.

The highest contribution to the eurozone’s annual inflation rate came from services, which came in at 4% in July, down a notch from 4.1% in June. This is double the European Central Bank’s inflation target of 2%.

The uptick in eurozone inflation, along with the weak eurozone economy and high wage growth will make it difficult for the ECB to deliver a rate cut at the next meeting on September 12. The central bank trimmed rates by a quarter-point in June, the first cut in the new era of lowering rates in response to declining inflation.

The Federal Reserve will almost certainly lower rates at the September meeting, with speculation swirling on the size of the cut. The probability of a 25-basis point cut stands at 75% and a 50 bps cut at 25%, according to the CME’s FedWatch. On Friday, Jerome Powell will address the Jackson Hole Symposium and could signal what the Fed has in store for next month’s meeting.
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EUR/USD Technical

  • EUR/USD is testing resistance at 1.1107. Above, there is resistance at 1.1128
  • 1.1064 and 1.1043 are the next support levels

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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