After the ECB and Jobless Claims, the Euro Stays Stable Versus the Dollar

As expected, the ECB – European Central Bank kept the interest rates on main refinancing operations, marginal lending facility, and deposit facility unchanged at 0.00 percent, 0.25 percent, and -0.50 percent, respectively.

The market’s first reaction to the ECB’s policy statements has been rather modest, with the EURUSD pair trading flat on the day at 1.1793. After the ECB officially revealed its updated forward guidance, the euro is trading steadily in the US session. However, when compared to Sterling and commodity currencies, the common currency is noticeably weak.

Meanwhile, while market attitudes remain constant, the dollar and Swiss currencies, as well as the yen, are weak. We’ll now see if US equities can build on their recent robust rallies to retest recently set record highs.

The number of initial claims for jobless benefits in the United States rose 51 thousand to 419 thousand in the week ended July 17, which is worse than expectations of 350 thousand. The four-week moving average of initial claims rose from 750k to 385k.

For the week ending July 10, the number of ongoing claims fell by -29 thousand to 3.236 thousand, which is the lowest level since March 21, 2020. The four-week moving average of ongoing claims fell -44k to 3,338k, also the lowest since March 21, 2020.

ECB: Euro Stays Stable Versus the Dollar

The European Central Bank left its key monetary policy settings intact at the end of its July meeting, as was generally expected, and did little to add any real stimulus. The ECB updated its forward guidance on rates, predicting that rates will remain unchanged or lower until inflation reaches 2% considerably ahead of the anticipated horizon.

After the ECB meeting, EUR took its cue from relative EUR fixed-income performance at first, but the single currency stabilized during the press conference, remaining near to steady for the day. Looking ahead, more EUR/USD downside is favored, but stress that this is primarily a play on USD real rates, global inflation exposure, and global cross-asset swings, rather than ECB monetary policy.

As shown by the 4-hour MACD, the EUR/USD continues to lose negative momentum. Nonetheless, with the 1.1880 resistance intact, an additional drop is predicted. As the third phase of the correction from 1.2348, the current drop from 1.2265 would target 1.1703 support. However, a break of 1.1880 on the upside will signal a short-term bottom and shift the bias back to the upside for a bigger rebound to 1.1974 resistance initially.