FOREX Fundamental Analysis for EUR/USD on June 2, 2023
Some investors think that interest in the dollar as a defensive asset is getting lower, when in fact the national debt story is long past and has no impact on the greenback. The preconditions for the EUR/USD rally were created before the deal between the Republicans and the Democrats, which made it possible to open long positions at an attractive price.
Jerome Powell's new deputy Philip Jefferson spoke out about a pause in the rate hike cycle, which sent shockwaves through the financial markets. Investors even ignored the labor market report from ADP with 278 thousand new jobs.
After the Fed Vice President's speech, forex trading changed positioning. It looks like only a very, very strong Non-farm Payrolls will force the Fed into an act of monetary restraint in June. The idea of a "dovish" reversal by the regulator is returning to the market.
While the Fed takes a pause, the ECB decides to continue raising rates despite the CPI slowing in May from 7.0% to 6.1%. Christine Lagarde thinks it is too early to talk about a complete victory over inflation. The European regulator's policy supports buyers of the single currency.
It is hard to say yet whether EUR/USD has gone into consolidation or whether the trend will change direction. We are waiting for the report on U.S. labor market, though chances for the dollar to strengthen are minimal. If the data is as forecasted, a little worse or a little better, we'll build up long positions.