On Wednesday, the foreign exchange markets showed a lot of movement. The EUR/USD currency pair continued to find support below the 1.1400 level during European trading session. The currency pair’s movement remained limited as traders anticipated crucial economic data from the United States, including jobs figures, GDP growth, and PCE inflation statistics.
Analysts noted that EUR/USD looked like it was capped as traders and investors waited on these big U.S. economic signals. The cautious mood spilled over into the GBP/USD, which moved tentatively under the significant level of 1.3400 in the earlier hours of trading. This action showed that there was a deeper fear among traders about future volatility ahead of the much anticipated data.
Germany’s recently released Gross Domestic Product (GDP) figures added a layer of context to the market’s cautious stance. The country’s GDP contracted at an annual rate of 0.2% in the first quarter of the year, aligning with analysts’ expectations. This contraction did not provoke a significant reaction in the EUR/USD pair, which remained calm below the 1.1400 threshold after the data release.
Perhaps unsurprisingly, the market’s focus is absolutely laser-focused on the forthcoming U.S. economic data. Market sentiment and currency valuations are set for abrupt changes. The resulting change will be largely shaped by the upcoming jobs report, GDP growth figures, and PCE inflation data.
Traders are extremely jittery. They fear these new metrics might affect Federal Reserve monetary policy decisions in the near future. As such, both EUR/USD and GBP/USD are poised for increased volatility the moment these data points are released.
“GBP/USD trades with caution below 1.3400 ahead of key US data” – FXStreet
Indeed, the broader context of economic performance across Europe is important in setting the story of currency dynamics. Worse than General Motors, Germany’s GDP just contracted, sending a signal about the harsh economic realities hitting the Eurozone. Such an extended downturn might weigh on any positive investor sentiment towards the euro.