European Currencies Strengthen Ahead of Key Macroeconomic Releases

EUR/USD and GBP/USD continue to recover moderately following the recent weakening of the US dollar. European currencies have been supported by expectations that US inflationary pressures will continue to ease after softer-than-expected CPI and PPI data, reinforcing market hopes for a more accommodative Federal Reserve policy. However, the upside potential for both the euro and the pound remains limited amid persistent geopolitical tensions. The United States continues to carry out strikes against targets in Iran, supporting demand for defensive assets and periodically boosting the US dollar.

Today, traders will closely monitor a series of important economic releases from the United Kingdom, the eurozone, and the United States, which could determine the next direction for the major currency pairs.

EUR/USD

EUR/USD continues to develop after a bullish engulfing reversal pattern while attempting to establish itself above the key resistance level at 1.1460. Technical analysis suggests the pair could extend its advance towards the 1.1540–1.1580 area. The bullish scenario would be invalidated by a decisive move below 1.1370.

Key events for EUR/USD:

• 11:40 (GMT+3): Spain 10-year government bond auction;
• 15:30 (GMT+3): US Core Retail Sales;
• 15:30 (GMT+3): US Philadelphia Fed Manufacturing Index.

GBP/USD

GBP/USD is recovering more strongly than EUR/USD. Buyers have managed to establish the pair above the important 1.3500 resistance level, and positive UK macroeconomic data could pave the way for a further advance towards the 1.3610–1.3680 region. At the same time, after such a rapid rally, a corrective pullback could see the pair retest the 1.3440–1.3480 area, this time as support.

Key events for GBP/USD:

• 09:00 (GMT+3): UK Gross Domestic Product (GDP);
• 14:00 (GMT+3): NIESR Monthly UK GDP Tracker;
• 18:30 (GMT+3): Atlanta Fed GDPNow estimate.

Overall, European currencies retain the potential to extend their recovery as markets continue to price in a more accommodative Federal Reserve. However, today's economic releases from the UK, the eurozone, and the US could significantly reshape market sentiment. If US data once again disappoint expectations, EUR/USD and GBP/USD may receive additional support. Conversely, stronger-than-expected US figures could revive demand for the dollar and limit further gains in European currencies.

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