The EUR/USD is making a notable comeback, approaching 1.0650 during the early European session on Wednesday, as the US dollar hovers near a three-month low. This decline in the dollar stems from concerns about slowing US economic growth and fresh Chinese stimulus measures. Simultaneously, European markets are witnessing a positive shift, with DAX futures rising by nearly 2% at the time of writing.
On Tuesday, US tariffs went live, which initially caused a downturn in global markets, including US indices. However, rumors of a potential tariff rollback began circulating, injecting some optimism into the markets. Investors today are keenly monitoring key economic indicators, such as the US ADP report, and PMI and ISM numbers from both sides of the Atlantic. The data is expected to provide insights into the economic health on both continents and guide market movements.
European investors appear to be resilient, brushing off negative news with the expectation that US tensions will eventually stimulate economic activity sooner rather than later. In contrast, any further weakness in US economic data is likely to be perceived negatively, potentially diminishing investor appetite for riskier assets.
The British pound, often referred to as the Cable, had previously entered a medium-term bullish consolidation zone. Currently, it is testing the 200-day moving average resistance on the upside, with GBP/USD holding steady near 1.2800 in European trading hours on Wednesday.
Across Europe, the Euro is buoyed by Germany's plans for fiscal reforms, which has provided additional support to the currency. The EUR/USD surged past the 1.06 mark, stepping into a medium-term bullish consolidation zone after overcoming the significant 38.2% Fibonacci resistance level following Trump's tariff actions.
In the commodity market, gold prices are maintaining their position above the $2,900 threshold early Wednesday. This comes after snapping a two-day upswing from three-week troughs of $2,833, signaling a strong recovery amidst global economic uncertainties.
Meanwhile, the recent US earnings season has been robust, with approximately 75% of companies surpassing earnings expectations. The S&P500 reported earnings growth of around 18%, marking the highest rate since Q4 2021. Despite this strong performance, more companies issued negative guidance than positive during this period, indicating potential challenges ahead.