It was only a transient dip beneath the 1.16 mark final week. Early this morning, EUR-USD is buying and selling nearly 2 cents larger round 1.1740. As our forex indices point out (which measure the efficiency of currencies towards the G10 common), the downward motion and now the upward motion can primarily be attributed to the USD aspect. In distinction, the euro has been buying and selling roughly sideways your complete month, Commerzbank’s Head of FX and Commodity Analysis Thu Lan Nguyen notes.
Latest rise in EUR/USD threat reversals appears justified
“The US Greenback restoration within the first half of July was doubtless pushed by the so-called ‘TACO commerce’ (‘Trump all the time chickens out’). In any case, US President Trump as soon as once more postponed the unique deadline for the introduction of reciprocal tariffs, undoubtedly to permit extra time for negotiating additional ‘offers.’ Up to now, his threats of excessive tariffs towards essential buying and selling companions have been nothing extra than simply that: threats. Little has been applied. In the meantime, additional ‘offers’ are regularly being introduced by which the tariffs are all decrease than initially introduced. The most recent instance is Japan, for which a tariff of 15% is to use as an alternative of the 25% introduced a number of weeks in the past.”
“Clearly, the relentless assaults on the US Federal Reserve by the US administration come into focus. Most not too long ago, it was Treasury Secretary Scott Bessent who lashed out on the Federal Reserve. Notably, the criticism is more and more centered round non-monetary coverage points. First, it was the renovation prices of the headquarters. Now Bessent talked about in an interview that your complete Fed as an establishment must be scrutinized. He sees the Fed’s independence jeopardized, however not by the political affect of the US authorities, however somewhat as a result of the Fed is liable to overstepping its mandate. It smells just like the US administration is searching for a loophole to place the Fed underneath stronger authorities oversight, with the reasoning ‘we have to guarantee they’re following their mandate.’ On the similar time, they will then use this elevated oversight to affect financial coverage.”
“I can properly think about there are areas the place the Fed operates in a grey zone – for instance, in monetary regulatory issues. Nevertheless, Bessent’s proposal for such a assessment comes at a particularly suspicious time. Particularly, at a time when the Fed is underneath large political stress to decrease rates of interest. Even when the assessment and attainable discrepancies had been authentic, they might nonetheless depart a sure style. If the Fed then additionally begins to aggressively reduce its rates of interest, alarm bells will begin ringing for some buyers. The latest rise in EUR/USD threat reversals, indicating the next USD crash threat from the market’s perspective, appears justified on this context.”
