All eyes are on whether the euro's post-ECB weakness will continue

All eyes are on whether the euro's post-ECB weakness will continue

28.07.2023

In the U.S. currency market yesterday, the dollar rose against the yen immediately after the release of the U.S. second-quarter GDP figures, which showed a significant expansion from the previous reading of 2.0% to 2.4%.The USD/JPY pair surged from 139.373 to 141.320, breaking above the 20-period moving average on the 4-hour chart. However, in response to a Nikkei newspaper article leaked early this morning regarding revisions to the YCC policy, the pair plummeted to 138.763. The market saw significant volatility.

Following yesterday’s ECB policy rate announcement, the central bank raised rates by 0.25% as expected by the market, triggering a “sell-the-fact” reaction that caused the euro to fall against both the yen and the U.S. dollar. The euro/yen pair fell from 156.187 to 152.194.The decline has continued during today’s Asian trading session, with the pair falling to 151.411. We will closely monitor the direction of the market to see if the euro’s decline continues into the U.S. trading session.

Today’s schedule includes France’s Q2 GDP at 14:30, a press conference by Bank of Japan Governor Ueda at 15:30, France’s Consumer Price Index and Producer Price Index at 15:45, Switzerland’s KOF Leading Index and Turkey’s trade balance at 16:00, Germany’s Consumer Price Index and South Africa’s fiscal balance at 21:00,at 9:30 PM, Canada’s GDP, U.S. personal income, U.S. PCE deflator, and U.S. second-quarter employment cost index; and at 11:00 PM, the U.S. University of Michigan Consumer Sentiment Index. We will carefully assess currency strength and weakness to determine whether the euro’s weakness following the ECB meeting will persist.