GemForex - EUR/USD

EUR/USD has declined below 1.0200 during the European trading hours on Thursday. The data from the euro area revealed a sharp drop in economic sentiment and business confidence in July. Investors await the second-quarter GDP growth data from the US.

EUR/USD has lost its bullish momentum after having gained nearly 100 pips in the late American session on Wednesday. The pair trades near the upper limit of its 10-day old range and needs to clear the 1.0230 level to continue to push higher.

Although the US Federal Reserve hiked its policy rate by 75 basis points (bps) to the range of 2.25-2.5% on Wednesday, the dollar faced heavy selling pressure. During the press conference, FOMC Chairman Jerome Powell said that they will not be offering any rate guidance from now on and added that they will adopt a “meeting-by-meeting” approach. Following these comments, the probability of one more 75 bps rate increase in September dropped to 30% from 47.3% a week ago.

Later in the day, the US Bureau of Economic Analysis will release its first estimate of the second quarter Gross Domestic Product (GDP) growth. The US economy is forecast to expand at an annualized rate of 0.4% following the first quarter's 1.6% contraction.

According to the CME Group's “FedWatch” Tool, markets are pricing in a 30% probability of one more 75 bps hike in September. With a stronger-than-expected GDP print, hawkish Fed bets could return and help the dollar regather its strength. On the other hand, EUR/USD recovery could pick up steam in case the US economy fails to rebound. The US Department of Labor's weekly Initial Jobless Claims data will also be featured in the US economic docket.