EUR/USD dropped under the very key 1.1500 figure. This decline marks another dramatic turn in the market, fueled by positive economic news from the U.S. During the American session on Wednesday, the currency pair even dropped below 1.1450. This is a mixed bag, but it’s no wonder traders reacted strongly to the latest updates about the US economy. And dollar strength could worsen this decline, as the US Dollar finds support from robust second-quarter GDP releases and positive ADP Employment Change data.
The US economy showed truly remarkable resilience with a headline positive surprise on GDP growth. Further, a surprise increase in private sector employment heightened optimism about the US Dollar’s strength. Commercial actors noticed how the decidedly bullish economic data was affecting the cross, particularly the EUR/USD currency pair. This data propelled the renewed bearish pressure on it. Traders are looking ahead to the next Federal Reserve policy announcement. They believe that this announcement could go a long way toward improving market sentiment.
4 backdrop of rapidly rising US Treasury bond yields, gold prices were pressured downward, testing levels just above $3,300. The appreciation of US yields has weighed heavily on XAU/USD. This transformation vividly underscores the extent to which currency and commodity markets tightly correlate and respond aggressively to clearly positive economic developments. As illustrated below, the effect on gold prices has been pronounced by each strong US data release. Third, they have resulted in a geographically broad-based strengthening of the US Dollar.
EUR/USD is trading near 1.1450 as we write. Market analysts think this bearish trend can only continue, at least until the Federal Reserve reveals its hand. The key policy announcements should help clarify what the future course of monetary policy. This newfound clarity would arguably add to or remove the prevailing EUR/USD selling pressure.
Since then, trading patterns of EUR/USD have been significantly shaped by impacts from US economic data surprises. The combination of strong fundamentals and expectations surrounding the Federal Reserve has created a challenging environment for the Euro against the Dollar.