EUR/USD drifts lower as US Dollar extends gains with Fed speakers on tap
- The Euro remains on the back foot on Monday, consolidating losses below 1.1750.
- The focus is on Fed officials' speeches for further clues about the bank's monetary policy outlook.
- Fed Chair Jerome Powell is expected to speak on Tuesday and might set the USD's near-term direction.
EUR/USD starts the week in the same weak tone seen at the end of the previous one, extending its reversal from long-term highs above 1.1900 set on Wednesday to trade near 1.1740 at the time of writing on Monday. The US Dollar has kept a moderate bullish tone in a calm Asian session with only a slew of Federal Reserve (Fed) speakers on schedule, later today, to provide some fundamental guidance.
More than ten Fed policymakers are expected to deliver press conferences this week and provide their views about the central bank's monetary policy plan. Investors will look with particular interest at the new member of the Fed's Board of Governors Stephen Miran, due to speak later on Monday. He is expected to defend his independence as policymaker and explain his reasons to opt for a jumbo interest rate cut last week, dissenting from the rest of the committee.
On Tuesday, Fed Chairman Jerome Powell will give a speech on the Economic Outlook at the Providence Chamber of Commerce, where he might delve into the need for a cautious approach to monetary policy. Last week, Powell's stance offered some contrast to the market consensus, which prices in nearly one rate cut in each of the two monetary policy meetings remaining this year.
In Europe, ECB's Lane and Nagel might give some more clues about the European Central Bank's monetary policy. In between, the Eurozone's Consumer Confidence will provide the main data point. Investors' focus, however, will remain on Tuesday's preliminary Manufacturing and Services Purchasing Managers Indexes (PMIs) for more insight into the region's economic outlook.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.04% | 0.21% | 0.11% | 0.09% | 0.18% | 0.25% | |
| EUR | -0.06% | -0.08% | 0.09% | 0.02% | -0.01% | 0.09% | 0.15% | |
| GBP | 0.04% | 0.08% | 0.12% | 0.13% | 0.10% | 0.20% | 0.29% | |
| JPY | -0.21% | -0.09% | -0.12% | -0.09% | -0.13% | -0.02% | 0.05% | |
| CAD | -0.11% | -0.02% | -0.13% | 0.09% | -0.03% | 0.08% | 0.16% | |
| AUD | -0.09% | 0.00% | -0.10% | 0.13% | 0.03% | 0.10% | 0.19% | |
| NZD | -0.18% | -0.09% | -0.20% | 0.02% | -0.08% | -0.10% | 0.05% | |
| CHF | -0.25% | -0.15% | -0.29% | -0.05% | -0.16% | -0.19% | -0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The US Dollar appreciates further in calm markets
- The US Dollar (USD) has kept trading higher against most peers in doleful Asian markets on Monday, and there is no economic data in Europe to provide any fundamental support to the Euro (EUR). In that sense, the cautious market sentiment is expected to keep Euro upside attempts limited.
- On Friday, Fitch upgraded Italian Credit ratings to BBB+ from BBB for the first time in four years, amid the country's improved political stability and Prime Minister Giorgia Meloni's success in reducing the fiscal deficit.
- The economic calendar is devoid of key fundamental releases on Monday, but a batch of Fed speakers is likely to provide some guidance to the US Dollar. The main focus will be on Miran, a voter and a dove, recently appointed by US President Trump to replace Amanda Kuugler. Beyond him, the New York Fed president, John Williams, St louis President, Alberto Mussalem, Richmond Fed President Tom Barkin, and Cleveland Fed president, Beth Hammack will speak to the press.
- Over the weekend, ECB officials Martins Khazaks and Edward Scicluna assessed that the bank's monetary policy is well placed at the moment and that there is no rush to cut interest rates further. These comments have offset ECB Mario Centeno's dovish views, who pointed to a rate cut as the bank's next move on Friday, and might have provided some support to the Euro.
Technical Analysis: EUR/USD approaches trendline support at 1.1725
EUR/USD has been correcting lower since last week's reversal from 1.1918 highs. Technical indicators are in bearish territory with the Relative Strength Index (RSI) still above oversold levels, suggesting that there might be scope for further downtrend.
The pair, however, is approaching the trendline from August 27 lows, where it might find some support. Below there, the next target would be the September 12 low at 1.1700, ahead of the September 11 low, near 1.1660. To the upside, Friday's high near 1.1795 is seen as the first relevant resistance area, ahead of the September 18 high, near 1.1850, and the September 16 high at 1.1878.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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