EUR/USD, GBP/USD, DXY Price Forecast: DXY Surges Above $104.30; More Upside?

On Thursday, July 18, key events included the European Central Bank’s (ECB) decision to maintain the main refinancing rate at 4.25%. This stability is crucial for the euro, as consistent rates often lead to steady investor confidence.

However, the German Producer Price Index (PPI) released on Friday showed a slight increase of 0.2% month-over-month, up from the previous 0.1%, indicating modest inflation pressures which could impact future ECB policy decisions.

The UK released several important indicators on Thursday. The Claimant Count Change showed an increase of 32.3K, higher than the forecasted 23.4K, suggesting a weakening labour market. The Average Earnings Index remained steady at 5.7%, but down from a previous 5.9%, indicating slower wage growth.

On Friday, retail sales fell by 1.2%, worse than the expected -0.6%, and public sector net borrowing was higher at 13.6B compared to the forecast of 10.8B. These figures paint a picture of a slowing UK economy, which could weigh on the pound.

In the US, unemployment claims rose to 243K from the previous 229K, signalling a potential softening in the labour market. However, the Philly Fed Manufacturing Index showed robust growth, jumping to 13.9 from 2.7, indicating strong manufacturing activity. This mixed economic data contributes to the Dollar Index’s slight increase to 104.309, up 0.07%.

Events Ahead

Looking ahead, key events include the release of the eurozone’s current account figures, with a forecast of 34.6B. Additionally, speeches from FOMC members Williams and Bostic are scheduled, which could provide insights into future US monetary policy.

The stability of the ECB’s refinancing rate at 4.25% and the mixed data from the US, such as rising unemployment claims but strong manufacturing growth, will continue to influence the EUR/USD and GBP/USD pairs.

The UK’s weak retail sales and increased public sector borrowing add pressure on the pound, while the dollar benefits from a stable economic outlook and strong manufacturing performance.