EUR/USD: Remains Constructive Ahead of ECB

Economic

Forex

Summary:

EURUSD holds in extended consolidation under new multi-week high (1.1454) but keeps firm tone that boosts prospects for further growth.

Bullish daily studies (strong positive momentum, MA’s in bullish configuration and thick daily cloud underpinning near-term action) contribute to positive outlook

Rising 10DMA tracks the price action since May 19, and offers solid support at 1.1373 (also near broken Fibo 61.8% of 1.1573/1.1065 pullback) followed by daily Tenkan-sen (1.1332) which should hold dips and keep lower trigger at 1.1286 (daily cloud top) intact.

All eyes are on today’s ECB decision and Friday’s US NFP report which would provide fresh direction signals.

The European Central Bank is widely expected to cut rates by additional 25 basis points and likely to signal pause in its year-long easing cycle until autumn.

Traders will be focusing on President Lagarde’s press conference for more details about ECB’s action in coming months.

Eurozone inflation is at CB’s target zone, however the policymakers remain cautious about potential stronger negative consequences, as escalation of trade war would fuel inflation.

On the other hand, the two recent reports from the US labor sector were mixed, as JOLTS showed stronger than expected results in May while hiring in US private sector slumped last month (ADP report).

US Nonfarm Payrolls rose by 177K in April and economists expect 130K increase in May, though some banks lowered their expectations after disappointing ADP report results that added to growing worries about unexpected NFP drop.

The US dollar is in a downward trajectory and may accelerate losses on NFP miss that would provide fresh boost to the single currency and open way for potential retest of 2025 peak (1.1573).

Res: 1.1453; 1.1473; 1.1500; 1.1547.
Sup: 1.1404; 1.1373; 1.1357; 1.1332.

Source: ACTIONFOREX

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Gerik

Economic

Rate Cut Reflects Mounting Economic Pressures

As widely anticipated, the European Central Bank is set to reduce its benchmark interest rate by 0.25 percentage points to 2%, marking its eighth rate cut since June 2024. This monetary easing comes at a time of dual economic challenges: soft inflation and intensifying global trade tensions, particularly with the United States. The ECB, led by President Christine Lagarde, faces mounting pressure to stimulate domestic demand as external conditions deteriorate.

The latest inflation data—1.9% in May, down from 2.2% in April—gives the ECB critical room to maneuver. With inflation now below the 2% target, the bank is shifting its policy stance from inflation control to growth support, reversing its earlier rate-hiking trajectory that peaked at 4% during the 2021–2023 inflation crisis.

Trump’s Trade Escalation Threatens Europe’s Fragile Recovery

The rate cut coincides with rising concerns about the economic fallout from President Donald Trump’s trade policies. His administration has implemented a 20% tariff on EU goods, with threats of a 50% hike, and recently doubled tariffs on global steel imports—exempting only the UK. While retaliation has been paused until July 14, the uncertainty around these measures is already chilling investor confidence and weakening business sentiment across the continent.

Europe’s growth trajectory has suffered in turn. The European Commission recently cut its 2025 growth forecast from 1.3% to 0.9%, citing trade tensions as a principal risk. This downgraded outlook was based on the optimistic assumption that tariffs might be capped at 10%, underscoring the potential downside should negotiations collapse.

The trade war disproportionately affects Germany, France, and Italy—countries with large manufacturing bases and exposure to U.S. demand. The tariff shock compounds existing vulnerabilities in European industry, particularly in autos and machinery, pushing the ECB to act preemptively.

Monetary Policy Strategy: Easing to Offset External Risks

With rate cuts now an active part of its strategy, the ECB aims to lower borrowing costs for businesses and households, thus supporting internal demand amid waning exports. In theory, cheaper credit can spur investment, stabilize consumption, and cushion the shock from declining net trade.

Yet, the effectiveness of monetary policy in this environment is uncertain. Interest rates are already low by historical standards, and structural issues such as low productivity and aging demographics limit potential upside. Additionally, the ECB is constrained by political divisions within the Eurozone and limited fiscal support from member states.

Lagarde will likely be pressed in her post-decision press conference on how the ECB plans to respond if Trump’s tariffs increase further or if negotiations fail altogether. Forward guidance will be crucial in managing expectations about future rate paths and potential non-standard interventions.

The ECB’s decision to cut rates is a calculated response to both cyclical slowdown and geopolitical risk. As Trump’s trade policy injects volatility into global markets, Europe finds itself forced to rely more heavily on monetary policy to stabilize its economy. The road ahead will test the ECB’s capacity to shield the Eurozone without reigniting inflation or depleting its policy arsenal. All eyes now turn to how Brussels and Washington navigate the July tariff deadline—and how Lagarde balances internal and external shocks in her evolving monetary response.

Source: Reuters

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Glendon

Forex

Economic

What matters in U.S. and global markets today

It was the bond market's turn to rally over the past 24 hours, with a stream of soft U.S. economic readings lifting hopes for Federal Reserve easing just as the European Central Bank is teed up for another rate cut on Thursday.

I'll discuss this and all of the market news below, and then in today's column, I explore Switzerland's deflation dilemma and explain why all investors should care what happens with the Swiss franc.

Today's Market Minute

* U.S. PresidentDonald Trumpsigned a proclamation on Wednesday banning the citizens of 12 countries from entering the United States, saying the move was needed to protect against "foreign terrorists" and other security threats.

* Hardline conservative Republicans in the U.S. Senate and billionaire Elon Musk showed no sign of softening opposition to President Donald Trump's tax-cut and spending bill on Wednesday, as they pushed for deeper reductions in government outlays.

* The euro steadied near six-week highs against the dollar ahead of an expected interest rate cut from the European Central Bank on Thursday, while the U.S. currency recovered modestly from a dip after data renewed fears of slow growth and high inflation.

* Investors, consumers and policymakers may justifiably fear the specter of tariff-fueled inflation later this year and beyond, but Reuters columnist Jamie McGeever says it's powerful global disinflationary forces that are weighing most heavily right now.

* The Trump administration's latest efforts to curb U.S. petrochemical exports to China could end up hurting the U.S. energy sector just as much, or more, than the Chinese economy, argues Reuters columnist Ron Bousso.

ECB to cut, Fed hopes up

The ECB is widely expected to cut its main interest rate to 2% later today, effectively bringing inflation-adjusted rates back to zero for the first time in almost two years as May headline inflation has already returned to target.

The big question now is whether the ECB will signal that it will pause during the summer while the murky global trade picture clears up - much as the Bank of Canada did on Wednesday.

Aside from questions about ECB boss Christine Lagarde seeing out her full term as president, the focus of the press conference will likely be on possible ECB plans for coping with potentially outsize euro strength ahead. There will also be close attention paid to the ECB's signalling regarding its balance sheet runoff.

European stocks (.STOXXE) pushed higher on Thursday. The euroheld above $1.14 ahead of the ECB decision, after the dollar skidded lower again Wednesday. The move in the greenback was largely driven by a series of weak readings on U.S. private sector jobs and service sector activity for May.

Wall Street stocksended Wednesday's session unchanged, and futures stalled ahead of today's open.

The latest economic news also dragged 10-year Treasury yieldsback down to their lowest levels in a month. The futures market is now pricing in some 56 basis points of Fed easing for the rest of the year, with a quarter point cut by September almost fully baked in.

President Donald Trump lost little time before pressuring Fed boss Jerome Powell to lower borrowing costs.

"ADP number out. 'Too Late' Powell must now lower the rate. He is unbelievable. Europe has lowered nine times," Trump said in a Truth Social post, referring to Wednesday's jobs data and - mistakenly - the seven ECB cuts so far in the current cycle.

The tariff picture remained unclear, meanwhile.

There is still no specific date or time set for this week's hotly anticipated call between Trump and China's President Xi Jinping, but Paris talks between U.S. Trade Representative Jamieson Greer and European Union counterpart Maros Sefcovic appeared to go well despite the doubling of steel tariffs this week.

Trump's deadline for countries to present their improved trade negotiations passed without any concrete developments.

Germany's new chancellor Friedrich Merz will hold his first face-to-face talks with Trump on Thursday in a high-stakes meeting in the Oval Office.

Meanwhile, the fate of Trump's 'big, beautiful' fiscal bill in the Senate also remained in the balance.

Hardline conservative Republicans and billionaire Elon Musk stepped up opposition to the tax cut and spending bill on Wednesday, pushing for deeper cuts, with Musk bemoaning "the fast lane to debt slavery."

The nonpartisan Congressional Budget Office estimated the bill - which would extend Trump's 2017 tax cuts and step up spending for the military and border security - will add about $2.4 trillion to the country's $36.2 trillion debt pile.

Elsewhere, MSCI's all-country stock index hovered just below Wednesday's new all-time high, with stocks in China and Europe advancing and South Korea's Kospi indexadding another 1% on top of Wednesday's 2% gains after the presidential election there this week.

Japan's Nikkeibucked the trend after another poor government bond auction there, despite reports yesterday that the Bank of Japan may consider slowing its balance sheet rundown.

And now for today's deep dive, I discuss Switzerland's return to deflation due to the supercharged Swiss franc and consider the wider implications for global investors.

Chart of the day

Thomson ReutersTrade worries and uncertainty color Fed outlook

U.S. economic activity has declined and higher tariff rates have put upward pressure on costs and prices in the weeks since Federal Reserve policymakers last met to set interest rates, the Fed's latest "Beige Book" said on Wednesday. "On balance, the outlook remains slightly pessimistic and uncertain", concluded the report. "There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward."

Today's events to watch

* European Central Bank policy decision (8:15 AM EDT), economic projections and press conference from President Christine Lagarde

* U.S. April international trade balance (8:30 AM EDT), weekly jobless claims (8:30 AM EDT), Q1 revisions on unit labor costs and productivity (1:30 PM EDT); Canada April trade balance (8:30 AM EDT)

* Federal Reserve Board Governor Adriana Kugler, Kansas City Fed President Jeffrey Schmid, Philadelphia Fed chief Patrick Harker all speak. Bank of England policymaker Megan Greene speaks

* German Chancellor Friedrich Merz meets U.S. President Donald Trump in Washington

* U.S. corporate earnings: Broadcom, Lululemon, Brown-Forman

Source: Reuters

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Risk Warnings and Disclaimers

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Olivia Brooks

Political

Russia-Ukraine Conflict

Russia will respond to Ukraine's latest attacks as and when its military sees fit, the Kremlin said on Thursday, accusing Kyiv of state terrorism and confirming that President Vladimir Putin had told Donald Trump that Moscow was obliged to retaliate.

Ukraine used drones to strike Russian heavy bomber planes at air bases in Siberia and the far north at the weekend, and Russia also accused it of blowing up rail bridges in the south of the country, killing seven people.

Kremlin spokesman Dmitry Peskov, at his daily briefing with reporters, highlighted comments made by Putin a day earlier about the railway attacks.

"The president described the Kyiv regime as a terrorist regime, because it was the regime's leadership that consciously gave the order, the command, the order to blow up a passenger train. This is nothing other than terrorism at the state level. This is an important statement by the president," said Peskov.

Russia has not yet provided evidence that Ukrainian leaders ordered the rail attacks, and Kyiv has not acknowledged responsibility.

Ukrainian attacks inside Russia and Russian air strikes and advances on the battlefield have escalated the war that began in February 2022, damaging prospects for peace talks that the two sides resumed in Turkey last month.

Peskov noted, however, that Putin had supported the view of Foreign Minister Sergei Lavrov at a meeting on Wednesday that working-level contacts with Ukraine should continue.

Peskov said Putin and Trump did not discuss holding a face-to-face meeting when they spoke on Wednesday. He said there was a general understanding that such a meeting was necessary, but it had to be properly prepared.

The two did not discuss the possible lifting of sanctions against Russia, Peskov said in reply to a question.

Source: Reuters

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Michelle

Cryptocurrency

Ethereum (ETH) has recently completed four consecutive 2-week green candles—a bullish signal that’s catching the attention of seasoned crypto analysts. This pattern, last seen in Bitcoin’s (BTC) chart during the aftermath of the March 2020 crash, led to one of the most explosive bull runs in crypto history.

The similarity between Bitcoin’s 2020 performance and Ethereum’s current trajectory is striking. After BTC’s fourth green candle in 2020, the market momentum didn’t just continue—it accelerated into a full-blown bull cycle that pushed prices to all-time highs.

Now, ETH traders are drawing parallels and hoping history repeats itself in 2025.

Is Ethereum on the Brink of a Major Bull Run?

In 2020, Bitcoin’s breakout following four green biweekly candles marked a shift in market sentiment—from fear to cautious optimism, and finally, to euphoria. Ethereum seems to be in a similar phase now. After months of consolidation and bearish sentiment, ETH has flipped the script and steadily moved upward over two months.

This pattern is more than just a coincidence. Market cycles tend to rhyme, and ETH could be mirroring Bitcoin’s early steps from the last major bull market. Analysts are particularly encouraged by Ethereum’s resilience and strength amid macro uncertainty, just as BTC showed in 2020.

While nothing is guaranteed in crypto, these patterns often guide trader psychology and market behavior.

$ETH has formed 4 consecutive 2W green candles since the bottom.In 2020, BTC did the same thing after the March crash.The similarities between BTC 2020 and ETH 2025 are just mind blowing.

What to Watch Moving Forward

For Ethereum to truly follow in Bitcoin’s footsteps, it will need to maintain this momentum. Key resistance zones lie ahead, and on-chain data, volume metrics, and macroeconomic signals will all play a role. However, four straight 2-week green candles offer a rare and powerful signal that many consider a strong foundation for a sustained uptrend.

If the current trend holds, ETH might just be at the start of a bullish chapter similar to what Bitcoin experienced from 2020 to 2021.

Source: CryptoSlate

Risk Warnings and Disclaimers

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Gerik

Political

Pentagon Chief: 5% Must Be Reached by June Summit

U.S. Defense Secretary Pete Hegseth, speaking at the NATO Defence Ministers' meeting in Brussels, reinforced President Trump’s call for NATO members to increase defense spending to 5% of GDP, nearly triple the current 2% guideline. Framing the move as a non-negotiable shift toward a more “formation-based” alliance rather than a symbolic one, Hegseth declared, “It has to happen by the summit at The Hague later this month.” His urgency reflects a U.S. strategy aimed at extracting concrete commitments ahead of the June 24–25 NATO summit.

This proposal marks a strategic escalation of Trump’s earlier pressure on NATO allies. While the 2% target—set at the 2014 Wales Summit—remains unmet by several nations, Trump’s demand for 5% represents a fundamental reshaping of transatlantic security financing.

NATO Diplomacy: Balancing Concessions and Commitments

European allies, according to multiple diplomats, are increasingly resigned to making concessions to secure continued U.S. military support in Europe. Dutch Prime Minister and current NATO Secretary-General Mark Rutte floated a compromise: a 3.5% direct defense spending goal plus an additional 1.5% toward broader security expenditures such as cybersecurity and dual-use infrastructure. This blended structure aims to preserve alliance cohesion while giving Trump a political victory he can tout domestically.

Still, divisions persist. Nations like Estonia and Sweden are pushing for an accelerated timeline to reach the target by 2030, citing urgent security needs near Russia’s border. In contrast, larger states like Germany, facing industrial and budgetary constraints, view a longer horizon—such as Rutte’s proposed 2032—more realistically. Germany's Defense Minister Boris Pistorius acknowledged that meeting the new NATO capability targets would require 50,000 to 60,000 more troops, highlighting the scale of investment needed.

New Capability Targets: Reshaping NATO’s Military Balance

Alongside fiscal goals, NATO is working toward “historic” new capability benchmarks. These would redefine each member state's obligations in terms of deployable troops, equipment, and ammunition. Rutte emphasized that such targets will make NATO “a stronger, fairer and more lethal alliance,” suggesting a rebalancing of responsibilities between Europe, Canada, and the United States.

However, debates continue around the inclusion of “defense-related” spending categories, such as digital infrastructure and homeland security investments. A NATO diplomat noted the need for definitions that are both precise and adaptable to national contexts. These discussions will likely stretch up to the summit’s opening.

Strategic Implications

Trump’s insistence on a 5% GDP defense benchmark reflects both domestic political calculations and long-standing U.S. frustrations with perceived European underinvestment in NATO. If enacted, this shift would not only redefine defense budgets but also set new norms for alliance readiness in the face of rising global threats—from Russia to cyberwarfare.

Nevertheless, the financial and political burden on European economies could deepen internal EU tensions, particularly as members balance NATO obligations with social spending and climate targets.

As the Hague summit approaches, NATO faces a pivotal moment: whether it can meet Trump’s 5% defense challenge without fracturing the alliance. The outcome will shape not just transatlantic relations, but the global military balance for years to come.

Source: Reuters

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Gerik

Economic

Resilient Demand at Home Counters Global Weakness

According to fresh data from Germany’s federal statistics office, industrial orders increased by 0.6% month-over-month in April, defying market forecasts that predicted a 1.0% contraction. This unexpected rise, driven primarily by a 2.2% surge in domestic orders, highlights Germany’s internal economic stability even as external demand wavers.

Foreign orders, on the other hand, declined by 0.3% overall. This was split between a modest 0.5% rise in eurozone demand and a sharper 0.9% fall in orders from outside the bloc. These figures reinforce the narrative that global trade uncertainties—ranging from tariff disputes to geopolitical tensions—are still weighing on German exporters.

Short-Term Momentum Remains Positive

The less volatile three-month comparison from February to April showed a 0.5% increase in new orders relative to the previous three-month period. While this figure suggests modest growth momentum, it also indicates a fragile recovery, dependent more on domestic resilience than on sustained international demand.

Moreover, the March data was revised downward slightly from a 3.6% to a 3.4% gain, but the trend still indicates a rebound after the industrial sector’s earlier stagnation. This back-to-back monthly growth provides tentative optimism for the manufacturing-heavy economy, especially as it navigates structural transformations toward greener production, as highlighted by CO₂-reduced steel production in recent industrial headlines.

Broader Outlook and Implications

While the April data offers a welcome surprise, the broader picture remains mixed. Germany continues to face challenges such as high energy costs, slowing Chinese demand, and evolving supply chain strategies in response to shifting global trade dynamics. However, the strength of domestic consumption and public investment appears to be a stabilizing force.

For policymakers and the European Central Bank, these figures may complicate efforts to balance industrial policy with monetary decisions. The modest recovery in industrial orders, if sustained, could alleviate some recessionary fears, but reliance on domestic demand alone may not be sufficient for long-term industrial revival without stronger external tailwinds.

April’s industrial order data underscores the duality of Germany’s current economic condition—solid internal demand contrasted against weakening international trade flows. While the resilience at home is encouraging, the durability of this momentum will hinge on improvements in the global economic environment and successful structural adaptations within Germany’s manufacturing sector.