The euro has maintained its gains for the fourth consecutive day, supported by the overall decline of the dollar. The U.S. dollar remains under pressure following the ceasefire between the U.S. and Iran and hopes for de-escalation. Uncertainty about the ceasefire's sustainability is prompting investors to exercise caution
Geopolitics has completely overshadowed macroeconomic data: traders have hardly reacted to the latest U.S. economic data. The releases have gone unnoticed. The core PCE increased by 0.4% month-over-month, as predicted, while the annual figure dropped from 3.1% to 3%. The final estimate of fourth-quarter GDP was revised downward to a modest 0.5%, while initial jobless claims exceeded consensus (219,000 vs. 210,000). Together, this indicates that disinflation is occurring, albeit slowly, so the Fed can afford to take no action and maintain the current monetary policy.
At the same time, the slowdown in GDP growth points to a slight decline in economic activity, highlighting the challenge for policymakers: controlling inflation while supporting growth amid labor market risks that lean toward a decline.
The slowdown in economic growth and the increase in jobless claims simultaneously amplify the central bank's dilemma: prices are still far from 2%, while labor market risks are already trending toward weakness.
On the geopolitical front, markets are anticipating negotiations between the U.S. and Iran scheduled for Saturday in Islamabad, Pakistan. However, Iran has already accused Israel of violating three points of the agreement due to strikes on Lebanon; Iranian President Masoud Pezeshkian stated that any attacks on Beirut would "devalue" the agreements. The market continues to assess the chances of renewed escalation, which limits risk appetite and prevents the euro from breaking much above 1.1700.
From a technical standpoint, the pair is attempting to consolidate above the round level of 1.1700, having already surpassed the 100-day and 200-day SMAs. The relative strength index has moved into positive territory, supporting the bulls.
The table below shows the percentage change of the U.S. dollar against major currencies for Thursday. The U.S. dollar has shown the greatest strength against the Japanese yen.
