FOREX Fundamental analysis for EUR/USD on July 6, 2023
The minutes of the FOMC meeting showed that not all members of the Committee agreed with the June pause in monetary restriction, but still decided to take a break. The arguments of the "hawks" are high inflation with a stable labor market and weak signals of an economic downturn. In July, given the block of recent US macroeconomic statistics, rates will probably be raised. In any case, the probability of such a scenario today is 90%, and the chances of two acts of monetary restriction in 2023 have increased from 30% to 33%.
Nevertheless, it is too early for dollar buyers to rejoice, much of the Fed's decision will depend on the report of the American labor market.
At the same time, 27 out of 60 Reuters experts do not see signs of a significant strengthening of the greenback and believe that the dollar index will remain in the consolidation range in the next three months. Only 19 analysts expect the greenback to strengthen, and 14 experts expect it to weaken.
The fundamental background supports the greenback, but the softening of financial conditions in the United States is pulling up stock indexes, and through the correlation of currencies and risky assets. The average semi-annual forecast for EUR/USD sees the pair around 1.1.
While the US economy has not been particularly affected by the tightening of the Fed's monetary policy, the labor market is stable, and inflation is holding at high values, there is no point in selling the greenback. The head of the Federal Reserve Bank of New York, John Williams, believes that the Federal Reserve still has a long way to go before meeting inflation targets. At the same time, investors were alerted by the official's phrase that job growth may slow down in the near future.
As for the European currency, the pressure on it was exerted by the decline in prices of European producers. This suggests that the ECB's rate hike has brought the desired results, and it may not make sense for the regulator to continue monetary restriction.
In short, the publication of the FOMC protocols has not changed the positioning in forex currency trading. I believe that before the release of the labor market report on Friday, market activity will be weak. Most likely, EUR/USD will remain in the range of 1.084-1.086. Even if the NFP turns out to be worse than the forecast, and the pair breaks through the upper limit of the range, I think it's not worth getting carried away with purchases.