EUR/USD Breaks Consolidation Pattern, Bullish Momentum Builds

In a notable development, the EUR/USD pair has broken free from its recent consolidation pattern and is showing signs of upward momentum in today’s trading. On Monday, the pair traded within a narrow range of 50 pips, maintaining its overall bullish tone. As the American session comes to a close, EUR/USD hovers around the 1.1240 mark, having found support from buyers near the 1.1200 level at the beginning of the week.

While prevailing optimism has been tempered by lackluster Chinese data, with Q2 Gross Domestic Product (GDP) falling short of expectations at 6.3% YoY, the US Dollar has continued to exhibit weakness, particularly during US trading hours. Despite a relatively light macroeconomic calendar for the rest of the day, the US Dollar has failed to hold its ground.

European Central Bank (ECB) officials have engaged market participants but have not provided any fresh insights. Policymaker Boštjan Vasle reiterated the need to continue tightening policy at the next meeting, citing resilient core inflation. Meanwhile, Governing Council member Joachim Nagel stated that the ECB must raise interest rates this month and will base its decision at the subsequent meeting on available data.

During the ECB conference on central, eastern, and south-eastern European countries held in Frankfurt, ECB President Christine Lagarde delivered pre-recorded opening remarks, touching on the topic of growth. Lagarde acknowledged that GDP growth has plateaued and expressed concerns about rising protectionism as countries reshape their supply chains to align with new strategic goals. Lagarde also highlighted a tenfold increase in trade restrictions over the past decade, citing the ongoing Russia-Ukraine conflict as an example.

Looking ahead, the next week will bring monetary policy announcements from both the Federal Reserve (Fed) and the ECB, setting the stage for potential market-moving decisions.

On the US front, the NY Empire State Manufacturing Index for July was released, coming in at 1.1, below the previous reading of 6.6 but surpassing expectations. The country is scheduled to publish June Retail Sales, Industrial Production, and Capacity Utilization data on Tuesday, providing further insights into the state of the economy.