EUR/USD slides on ECB decision, US GDP data

Today’s headlines

What’s happening: The euro moved lower against the US dollar on Thursday, following the European Central Bank’s policy announcement.

What happened: After announcing the latest policy decision, ECB President Christine Lagarde spoke about the central bank’s plans for rate hikes in the near term.

GDP growth data announced by the US also exerted pressure on the EUR/USD forex pair.

Why it matters: The European Central Bank raised its benchmark interest rate by 25bps on Thursday. This represented the ninth rate hike in a row. Policymakers said further hikes would depend on economic data from the bloc.

The latest hike sent main refinancing operations to 4.25%, the highest level since October 2008, while the rate on the deposit facility increased to more than a 22-year high of 3.75%.

During the press release, ECB President Christine Lagarde said the central bank may pause or increase rates and that a reduction in rates at its upcoming meetings was unlikely. “We are determined to break the back of inflation. Doing too much is not something we are concerned about. Bringing inflation down to 2% is our objective,” Lagarde said.

Despite some slowdown in consumer prices, inflation remains around 3x above the central bank’s target. In June, annual inflation decelerated to 5.5%, from May’s 6.1%. The ECB said food price inflation also continued to ease but remained at 11.6%.

Flash PMI data for July signalled the most significant contraction in the economy since November 2022, following a decline in the manufacturing index.

The EUR/USD forex pair also came under pressure due to a strengthening greenback. The US dollar gained following upbeat growth data from the country, which showed the economy expanding 2.4% in the second quarter, better than market estimates of 1.8%.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.9% to 101.77 on Thursday.

The EUR/USD forex pair fell around 1% to 1.0980, giving up gains after coming close to the 1.1150 resistance level earlier in the session.

What to watch: Traders will watch the ECB’s futures actions, with several economists projecting another interest rate hike in September following Lagarde’s latest comments.

Markets also await several major economic reports, including economic sentiment, industrial sentiment, services sentiment and consumer confidence from the Eurozone today.

The markets today

Intel will be in focus today after releasing results for its second quarter

Context: Shares of Intel surged in after-hours trading on Thursday, following better-than-expected quarterly results.

Details: Intel said personal computer demand had likely bottomed, while announcing an unexpected profit for the latest quarter. The chipmaker also issued a bullish sales outlook for the current quarter.

Intel reported revenues of $12.9 billion for the second quarter, representing a 15% year-over-year decline. However, the top-line figure came in better than market estimates of $10.97 billion. Earnings came in at 13 cents per share, compared to Wall Street expectations of a loss of 3 cents per share.

Client computing, the company’s PC chip business, recorded revenues of $6.78 billion, versus market estimates of $6.1 billion. Datacentre sales came in at $4 billion, above market expectations of $3.82 billion.

Management guided to third-quarter revenues of $12.9 billion to $13.9 billion, versus market views of $13.23 billion. They also projected earnings of 20 cents per share, higher than market expectations of 16 cents per share.

Shares of the Nasdaq-listed company gained 8.1% to $37.34 in extended trading on Thursday, following the release of quarterly earnings. The stock has jumped around 24% over the past six months.

What are expectations: Investors will watch Intel’s cost savings plans, after CFO David Zinser said projected savings of $3 billion for 2023. Markets will also monitor the company’s margins and cash generation.

Other Markets: US trading closed lower on Thursday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 0.67%, 0.64% and 0.22%, respectively.

The news shaping the markets

Russia’s Defense Minister Sergei Shoigu met North Korea’s Kim Jong Un to discuss defence and regional security issues. The news sent the safe-haven US dollar index slightly lower this morning.

Australia’s retail sales unexpectedly fell by 0.8% in June, versus market expectations of a flat reading, which exerted pressure on the AUD/USD forex pair.

Singapore’s private home prices declined by 0.2% in the second quarter, lower than the estimate of 0.4%, which sent the SGD/USD pair higher in forex trading this morning.

New Zealand’s ANZ Roy Morgan consumer confidence index declined to 83.7 points in July, from 85.5 a month ago, exerting pressure on the NZD/USD forex pair.

Argentina’s consumer confidence indicator increased by 1.8 points to 43.6 in July. This being the strongest reading since October 2019 sent the ARS/USD pair slightly higher in forex trading this morning.

What else to watch today

France’s GDP growth rate, household spending, inflation rate and producer prices, Spain’s economic growth, consumer price inflation and business confidence, Turkey’s balance of trade and economic confidence index, Germany’s GDP growth rate and inflation rate, Italy’s producer price inflation and manufacturing sales, Brazil’s unemployment rate, IGP-M inflation and government budget value, India’s foreign exchange reserves, value of loans, value of deposits, infrastructure output and money supply M3, Canada’s GDP and government budget value, as well as US core personal consumption expenditure prices, personal spending, personal income, employment cost index, University of Michigan consumer sentiment and Baker Hughes crude oil rigs.