The upcoming releases should answer many of the questions raised by Friday's events. Despite the market's clear reaction to Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Economic Symposium, his rhetoric was far from unambiguous.
Yes, on the one hand, he allowed for the possibility of monetary policy easing in the foreseeable future for the first time in a long while. But on the other hand, Powell once again expressed concern about high inflation and refrained from any specifics. For example, he did not announce a September rate cut (although many media outlets interpreted his words this way), instead limiting himself to saying that "a shift in the balance of risks could justify an adjustment of our policy." Against such vague wording, the probability of a September rate cut decreased. If before Friday's speech, this probability stood at 85%, it now amounts to 75% (according to CME FedWatch).
This is why the key macroeconomic reports next week are so important. At stake is the September rate cut. This means the EUR/USD pair will once again be in a zone of price turbulence.
Monday
The economic calendar is nearly empty, with only Germany's IFO indices of interest. In particular, the German business climate index is expected to rise to 88.7. The indicator has been growing steadily for seven months, and August may mark the eighth consecutive increase.
During the U.S. session, new home sales data will be released. After weak growth in July (+0.6%), a 4.8% decline is expected in August.
The Dallas Fed manufacturing activity index will also be published, though it usually has little impact on EUR/USD.
Tuesday
The most important reports on Tuesday will come from the U.S., including durable goods orders. This key indicator reflects corporate and consumer confidence in the future, expressed by a willingness to spend "now." Unfortunately, in June, the figure plunged to -9.4%. Forecasts suggest it will remain in negative territory in July at -3.8%. Excluding transportation, the index rose 0.2% in June, with a slight increase of 0.3% expected in July. If both readings come in negative, the dollar will face significant pressure.
Also on Tuesday, the Conference Board Consumer Confidence Index will be released. A month ago, it unexpectedly jumped to 97.2, contrary to expectations of further decline. Forecasts now point to a slight dip to 96.3. The dollar will only react strongly if the index deviates substantially from forecasts.
Wednesday
A quiet day for EUR/USD traders, with only Germany's GfK consumer climate index drawing interest. It has been in negative territory since November 2021 and hit a multi-month low in July. Forecasts suggest an August reading of -21.3, compared to -21.5 previously.
Later in the U.S. session, Richmond Fed President Thomas Barkin will speak. In his last speech on August 14, he expressed concern over the U.S. labor market, citing persistent uncertainty in hiring trends. He is likely to repeat these points, adding mild pressure on the dollar.
Thursday
On Thursday, all eyes will be on the U.S. GDP growth report. The second estimate for Q2 will be released. The advance estimate showed 3.0% growth, though a 30% decline in imports distorted this figure and did not signal actual economic acceleration. That "false progress" failed to impress markets. If the second estimate is revised downward (forecasts suggest it will match the initial figure), the dollar could react negatively, especially if domestic demand weakens further. Net domestic sales to private consumers rose just 1.2% in Q2, the weakest since late 2022. If this component is revised lower, EUR/USD buyers could gain substantial momentum.
The European Central Bank will also release the minutes of its July meeting. As expected, the ECB left policy unchanged, following its baseline scenario. At the press conference, ECB President Christine Lagarde said the bank could afford to "watch developments in the coming months without taking any action," which supported EUR/USD bulls. The minutes could reinforce that support, especially if U.S. GDP data disappoints.
Friday
During the U.S. session, traders will see the release of the core PCE index, the Fed's most closely monitored inflation gauge. Analysts expect the July reading to remain at 2.8% y/y, unchanged from the previous month. If the figure accelerates, it would signal an upward trend in inflation. This outcome would support the dollar, providing another argument for the Fed to maintain a cautious stance at its September meeting (alongside July's CPI and PPI increases).
Conclusions
The key U.S. macroeconomic reports could spark intense volatility in EUR/USD. Traders will assess the data through the lens of Powell's mixed remarks, reflecting both concern over the U.S. economy and inflation risks. Ultimately, EUR/USD is at a crossroads: by the end of the week, the pair could either break resistance at 1.1780 (the upper Bollinger Band on the D1 timeframe) or retreat into the 1.16 area.
