EUR/USD: ECB rates will remain high until 2% inflation
During the Asian trading session, the EUR/USD rate retreated from the upper limit of the ascending channel 1.0960–1.0710, stabilizing near the level of 1.0889.
The European Central Bank (ECB) intends to maintain high interest rates until inflation returns to the 2.0% target. This happens after rates were lowered in June for the first time since 2019, while the rate on basic refinancing operations was set at 4.25%, on margin loans — 4.50%, and on deposits — 3.75%. Christine Lagarde, the head of the ECB, said that the economic growth of the region is likely to slow down in the next quarter due to weak investment activity and limited increase in production capacity. She also stressed that monetary policy decisions will depend on current economic statistics, including wage dynamics, corporate profits and the state of the service sector. Lagarde also acknowledged that a possible deterioration in the geopolitical situation could lead to an increase in energy prices and an increase in transportation costs, which would put additional pressure on the consumer price index. However, if current data confirm the deflationary trend, it will strengthen the ECB's confidence in achieving the inflation target of 2.0% by the end of 2025. In this context, analysts expect two more rate adjustments this year, with the first change 80% likely to occur within the next two months.
- Support levels: 1.0860, 1.0760.
- Resistance levels: 1.0940, 1.1060.
GBP/USD: preliminary expectation of business activity data
After a significant rise last week, the GBP/USD exchange rate is declining due to the strengthening of the US dollar, the current level of which is 1.2927.
The publication of primary data on business activity indices will take place tomorrow at 10:30 (GMT+2). It is expected that the indicator in the manufacturing sector will increase from 50.9 to 51.1, and in the service sector from 52.1 to 52.5, which will bring the composite index to 52.3. This improvement, following the decline in June, may contribute to the strengthening of the pound.
The US dollar is trading at 104.00 on the USDX index. The impact of US President Joe Biden's decision to withdraw from the elections is gradually decreasing, giving way to the importance of economic statistics, which will become the basis for decision-making at the Fed meeting on July 31. Today at 16:00 (GMT+2), investors' attention will be focused on statistics on sales volumes in the secondary housing market — a key indicator for the real estate sector. According to forecasts, volumes may decrease from 4.11 million to 3.99 million after a previous decrease of 0.7%. If this is confirmed, Fed officials will probably rule out easing monetary policy at the upcoming meeting, leaving interest rates at a high level until mid-September.
- Resistance levels: 1.2960, 1.3070.
- Support levels: 1.2900, 1.2780.
NZD/USD: trade data increases pressure on the New Zealand dollar
The NZD/USD exchange rate continues to decline, approaching the level of 0.5967 against the background of the strengthening of the US dollar and disappointing data from New Zealand.
Yesterday, foreign trade indicators were presented, which indicated a decrease in activity: exports in June decreased to 6.17 billion New Zealand dollars compared to 7.00 billion, and imports decreased to 5.47 billion from the previous 6.94 billion New Zealand dollars. The monthly trade balance improved to NZ$699.0 million from NZ$54.0 million, but the annual balance still shows a deficit of NZ$-9.400 billion. Data on credit card spending, an important indicator of consumer demand, is expected tomorrow. The ongoing negative trend may indicate a lack of growth prospects for the New Zealand dollar in the near future.
- Support levels: 0.5950, 0.5870.
- Resistance levels: 0.5990, 0.6060.
USD/CAD: experts predict a rate cut by the Bank of Canada
The USD/CAD currency pair continues to grow for the second week in a row, trading within the long-term ascending channel and is currently checking the level of 1.3763 amid expectations of the next actions of the financial authorities of Canada and the United States.
Analysts assume that the Bank of Canada will maintain its soft monetary policy at the July meeting, the results of which will be announced tomorrow at 15:45 (GMT+2). The interest rate is expected to decrease from 4.75% to 4.50% amid a decrease in inflation from 2.9% to 2.7% on an annual basis and an increase in unemployment from 6.2% to 6.4% in June. The growth of the labor force and the reduction in the level of hiring influenced the acceleration of unemployment to 1.6% compared with the minimum values of July 2022. The high cost of loans is putting significant pressure on households, as the share of debt service costs has reached its highest level in the last 30 years, contributing only to a modest 1.0% recovery in the Canadian economy this year. These conditions create the prerequisites for a possible reduction in the interest rate by 50 basis points by the end of the year.
- Resistance levels: 1.3763, 1.3824, 1.3855.
- Support levels: 1.3671, 1.3610, 1.3549.