Euro fights back: EUR/USD, EUR/GBP Latest

EUR/USD has posted a new yearly high as the pair continues to attract buying interest. The bullish momentum seen earlier this month has re-emerged this week pushing the euro past the 1.10 mark against the dollar, a level not seen since the beginning of 2024. The weakness in the US dollar has been an important contributor to the momentum but the euro has been picking up strength across the board over the past few weeks. 

Wednesday US CPI report showed inflation falling mostly in line with expectations in July, with just a minor deviation in the headline YoY growth figure, coming in slightly below forecasts at 2.9% vs 3%. Nonetheless, the reaction in markets was quite subdued as there were no major surprises. This was a stark contrast to the momentum seen over the past few weeks, where softer data had induced heightened market volatility. For now, markets remain convinced that a rate cut will happen in September, what’s yet undecided is how big the cut will be. 

Source: refintiv

With not much on the economic calendar in the coming days EUR/USD traders will have to focus on the chart. The bullish rally is starting to show signs of exhaustion above 1.10 and the RSI is flattening out just below the 70 marks, suggesting a mild correction may be on the cards. 

However, there is likely to be support from buyers if the momentum turns with 1.0915 a possible area to focus on. Fundamentally, the European Central Bank (ECB) is slightly better positioned than the Federal Reserve at the start of this cutting cycle, having decided to cut for the first time in June in an attempt to take things slowly and gradually. This has been seen as a better strategy as it allows for more wiggle room to react to the upcoming data, which supports the euro against the dollar.  

EUR/USD daily chart

_{Past performance is not a reliable indicator of future results.}

Elsewhere, EUR/GBP has been covering significant ground having undone three months of pullback in just a matter of days. The pair shot above 0.86 last week but then corrected, settling below 0.8550. Wednesday saw another significant session for buyers, demonstrating the appetite for the pair to move higher, even if resistance is becoming more prominent. The RSI has turned lower but continues to show upside potential so we could see a retest of bullish appetite above 0.86 over the coming days. 

EUR/GBP daily chart

_{Past performance is not a reliable indicator of future results.}