EUR/USD steady at 1.1720 as Dollar firm amid US shutdown
- EUR/USD dives as Dollar gains ground as US government shutdown halts key economic data releases.
- Dallas Fed Logan flags inflation trending higher, warns of risks, while the labor market shows further signs of cooling.
- Eurozone unemployment unexpectedly rises to 6.3%, adding pressure to ECB outlook as growth risks remain tilted lower.
EUR/USD remains steady during the North American session on Thursday, yet registering back-to-back bearish days as the US Dollar strengthens amid the ongoing government shutdown and the absence of US economic data releases like Initial Jobless Claims. The pair trades at 1.1719, down 0.09%.
Shared currency struggles for direction as traders eye ISM Services PMI and Fed speakers with NFP data likely delayed
Wall Street is poised to end the day in the green despite the lack of progress to reopen the US government. Data from Challenger, Gray and Christmas revealed that companies are expected to hire over 30,000 fewer people in September, as the labor market continues to cool down.
Dallas Federal Reserve (Fed) President Lorie Logan was hawkish, stating that inflation is above target and trending upward. Despite this, she recognized the risks on both sides of the dual mandate, adding that the labor market is cooling.
Given the backdrop, investors seem confident that the Fed will slash rates at the October 29 meeting, with odds standing at 96%, as revealed by the Prime Market Terminal interest rate probability tool.
In the meantime, the US Nonfarm Payrolls report is expected to be delayed, leaving traders adrift for the Institute of Supply Management (ISM) Services PMI for September and Fed officials crossing the wires.
Across the pond, Eurostat revealed that the Unemployment Rate rose from 6.2% in July to 6.3% in August, above estimates.
Daily market movers: EUR/USD slides on Fed’s Logan hawkish comments, Dollar strength
- US employers announced 54,064 job cuts in September, down from 85,979 in August, according to Challenger, Gray & Christmas. Andy Challenger, senior Vice President at the firm, noted: “Right now, we’re dealing with a stagnating labor market, cost increases, and a transformative new technology.”
- Job openings in the US showed the labor market is slowing, yet vacancies rose from 7.21 million to 7.23 million in August. Digging into the data, the hiring rate edged down to 3.2%, the lowest level since June 2024, while layoffs remained at a low level.
- Bloomberg revealed that the US Supreme Court dismissed US President Donald Trump's order to oust Federal Reserve Governor Lisa Cook and allowed her to remain in her position at least until January, when the court is expected to hear Trump's arguments.
- ECB committee member, Martins Kazaks, reiterated that the bank's interest rates are at a "very appropriate level" and that they should remain unchanged unless further shocks occur.
Technical outlook: EUR/USD steadies at around 1.1710 awaiting a fresh catalyst
EUR/USD has remained steady above the 1.1700 figure during the last four trading days, yet it has failed to clear 1.1750, which could open the door for further gains. The Relative Strength Index (RSI) shows signs of being flattish near the 50 neutral level.
If EUR/USD clears 1.1740, the next resistance would be 1.1800, ahead of the yearly high of 1.1918. Conversely, a drop below 1.1700 would expose 1.1650, before challenging the 100-day SMA at 1.1610.
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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