Euro Rebounds, But US Dollar Pressure Remains
The euro strengthened against the US dollar on Tuesday (June 30th), supported by month-end repositioning that pressured the greenback. EUR/USD hovered around 1.1415 after previously touching an intraday low of 1.1382.
The euro's strengthening occurred despite strong US economic data. The Job Openings and Labor Turnover Survey (JOLTS) report showed US job openings rose to 7.594 million in May, exceeding market expectations of 7.3 million. April's data was also revised to 7.585 million.
Despite the increase in job openings, the market views the US labor market as less than fully resilient. Hiring remains weak, giving the data mixed signals for the Federal Reserve's policy outlook. On the one hand, labor demand remains resilient. However, on the other hand, companies appear to be less aggressive in hiring.
Other data showed a slight improvement in US consumer confidence in June. The Conference Board Consumer Confidence Index rose to 91.2 from a revised 90.6 in May. However, this figure is still below economists' expectations of 94.7, indicating that consumers are not yet fully confident in the economy.
The US dollar index (DXY) is hovering around 101.23 after touching an intraday high of 101.43. Despite weakening daily, the dollar is still on track for its second consecutive monthly gain. This situation means that EUR/USD still has the potential to record a second consecutive monthly decline.
Support for the US dollar continues to come from hawkish Federal Reserve expectations. Federal Reserve Bank of Cleveland President Beth Hammack said inflation remains too high and the Fed may need to consider raising interest rates. She also emphasized that inflationary pressures stem not only from energy but also from persistently high core inflation.
The market currently estimates the chance of a Fed rate hike in September at around 67%. These expectations keep the dollar attractive because the interest rate differential in the United States remains wide with other regions. Investors are now awaiting further employment data, including the ADP Employment Change and Nonfarm Payrolls, to gauge the Fed's next policy direction.
From the European side, expectations of additional interest rate hikes by the European Central Bank are becoming less certain. Falling oil prices have helped ease concerns about energy inflation, leading some market participants to believe the ECB doesn't need to be too aggressive in raising interest rates again in the near future.
However, views within the ECB are not entirely unified. Olli Rehn stated that he hasn't seen significant second-round inflation effects and believes the central bank shouldn't commit to a specific interest rate path. Conversely, Pierre Wunsch warned that second-round effects could still emerge and the ECB may still need one additional interest rate hike.
In addition to economic data, the market is also closely monitoring developments in relations between the United States and Iran. Envoys from both countries have arrived in Doha, but no direct talks have been scheduled. This uncertainty continues to maintain demand for the dollar as a safe-haven asset.
Overall, the euro's rebound on Tuesday was driven largely by a technical correction in the dollar and end-of-month repositioning flows. However, as long as the Fed remains hawkish, US employment data hasn't weakened significantly, and geopolitical uncertainty remains high, the EUR/USD's room for strengthening is likely to be limited. (arl)
Source: Newsmaker.id
