The euro managed to maintain some of its advantage against the US dollar after yesterday's statements from Federal Reserve officials, which were relatively dovish. Information indicating that consumer credit in the US resumed its growth in June and exceeded the forecast was seen as favorable for risk assets. Demand for loans increased due to a significant rise in non-revolving credits. Total consumer credit grew by $17.8 billion, following the lowest monthly increase since 2020 recorded in May. Data from the Federal Reserve, although not yet adjusted for inflation, surpassed the average forecast of $13 billion.
As mentioned earlier, nonrevolving credit, which includes education and auto credits, surged by $18.5 billion after a slight increase in the previous month. Notably, car sales increased in June from the previous month. A Federal Reserve survey also revealed that the number of car purchase loans hit a new record high in the second quarter. Meanwhile, student loans saw a slight decline but still remained in high demand.
Revolving loans, which cover credit cards, fell by $604.5 million. This is the first decline in over two years. However, the Federal Reserve highlighted that the steady growth of consumer loans and related expenditures was essential for supporting the economy, even with high interest rates. Demand for loans remains strong due to low unemployment and consistent wage growth. Still, the prices of many goods and services are much higher than a year ago, burdening household budgets.
The report also showed that the decline in revolving loans implies that Americans might be cutting back on spending due to high inflation and rising costs. If spending drops more dramatically, it could negatively affect future US economic growth.
While most economists currently expect the US to avoid a recession, some believe it is inevitable next year. A significant concern for millions of consumers will be the resumption of student loan payments this autumn after a three-year pause. Data shows that the average monthly payment is around $400.
Regarding today's technical picture for EUR/USD, pressure on the euro remains the same. To regain control, buyers should keep the price above 1.0970. This would pave the way to 1.1005. From there, the price may climb to 1.1040. However, it would be quite difficult without support from major traders. If the pair drops, I expect significant action from major buyers only around 1.0970. If they fail to be active, it would be wise to wait for a low of 1.0915 or consider long positions from 1.0870.
Meanwhile, the pound sterling also remains under pressure. The pound sterling will rise only after bulls gain control over the 1.2790 level, which still needs to be reached. Regaining this range will boost hopes for a recovery to 1.2840, after which we can talk about a surge to around 1.2880. If the pair falls, bears will attempt to take control over 1.2740. If they succeed, a breakout of this range will hurt bulls' positions and push GBP/USD to a low of 1.2690, with the potential to drop further to 1.2650.
