EUR/USD stands tall as US data cements hopes of Fed interest-rate cuts
- The Euro extends gains as weak US Initial Jobless Claims and moderate inflation clear the path for Fed rate cuts.
- Initial claims for unemployment benefits in the US increased at their fastest pace in four years.
- The ECB left interest rates unchanged and curbed hopes of further monetary easing in the near term.
The EUR/USD pair extends gains on Friday, trading around 1.1745 in the early European session, on track to post a second consecutive weekly gain. The US Dollar remains pinned near recent lows after US data cemented hopes of Federal Reserve (Fed) interest-rate cuts, while the European Central Bank (ECB) maintained the status quo and sounded optimistic about the economic outlook.
The ECB left its Deposit Facility rate unchanged at 2% and President Christine Lagarde said that "risk to economic growth has become more balanced". These comments curbed market expectations of further interest rate cuts in the near term and provided a significant boost to the Euro.
In the US, data from the US Department of Labour revealed that Initial Jobless Claims increased at their fastest pace in the last four years last week, while August's Consumer Prices Index (CPI) advanced broadly in line with the market expectations, clearing the way for a quarter-point Fed rate cut next week and at least another one before the end of the year.
In Friday's calendar, the focus is on the University of Michigan's US Consumer Sentiment Survey, which is expected to show a further deterioration, adding pressure to the US central bank to ease its monetary policy. The risk for the US Dollar is skewed to the downside.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | 0.07% | 0.13% | 0.02% | 0.00% | 0.13% | 0.03% | |
| EUR | 0.04% | 0.10% | 0.16% | 0.08% | 0.07% | 0.17% | 0.08% | |
| GBP | -0.07% | -0.10% | 0.08% | -0.04% | -0.07% | 0.08% | -0.02% | |
| JPY | -0.13% | -0.16% | -0.08% | -0.10% | -0.13% | -0.05% | -0.15% | |
| CAD | -0.02% | -0.08% | 0.04% | 0.10% | 0.02% | 0.12% | 0.00% | |
| AUD | -0.01% | -0.07% | 0.07% | 0.13% | -0.02% | 0.15% | -0.00% | |
| NZD | -0.13% | -0.17% | -0.08% | 0.05% | -0.12% | -0.15% | -0.10% | |
| CHF | -0.03% | -0.08% | 0.02% | 0.15% | -0.01% | 0.00% | 0.10% |
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 Dollar loses footing following weak employment data
- US Initial Jobless Claims increased to 263K in the first week of September, from 236K in the previous week, against expectations of a slight decline to 235K. Even though the state of Texas accounted for most of this increase – suggesting that there were some temporary distortions in the data – these figures provide further evidence of the deterioration of the US labour market and set the conditions for the Fed to cut rates by at least 25 basis points next week.
- At the same time, US Consumer Price Index figures confirmed the moderate uptick in inflation forecasted by market analysts. Yearly inflation picked up to 2.9% from the 2.7% level seen in July, while the core CPI increased at a steady 3.1%, also in line with expectations. The monthly CPI accelerated 0.4% from July's 0.2% pace, beating market expectations of a 0.3% increase. These numbers did not alter Fed easing bets, but trimmed expectations of a larger-than-usual 50 bps cut next week.
- In Europe, the European Central Bank left the Rate on the Deposit Facility steady for the second consecutive meeting, and President Lagarde's comments at the ensuing press conference revealed that the bank is not planning to ease its monetary policy further in the near term. Lagarde sounded confident about the economy and warned about the uncertain inflation outlook. All in all, a balanced stance that poses a Euro-supportive monetary policy divergence with the Fed.
- German data released on Friday confirmed that consumer inflation stood at 0.1% in August with July and at 2.2% compared with August last year. The impact on the Euro has been minimal.
- At 14:00 GMT, the preliminary US University of Michigan Consumer Sentiment Index for September is expected to further decline to 58.0 from August's 58.2 reading. These figures are about 15% below the average levels of the second half of 2024, revealing a significant deterioration in consumers' confidence and adding bearish pressure on the US Dollar.
Technical Analysis: EUR/USD maintains its bullish bias intact
EUR/USD bounced up from the bottom of the last three weeks' ascending channel on Thursday, keeping the broader bullish bias intact. Technical indicators show a moderate upside momentum on Friday. The RSI has bounced back beyond the 50 level, and the MACD has crossed above the signal line, suggesting that further appreciation looks likely.
Immediate resistance is at the intra-day high of 1.1745. Further up, the 1.1780-1.1790 (September 8, July 24 highs) is likely to hold bulls ahead of the channel top, now at 1.1810.
To the downside, the 1.1720 level is limiting downside attempts so far. Below here, the channel bottom is at 1.1670, right above Thursday's low at 1.1660. A breach of that level would cancel the bullish view and increase pressure towards the September 2 and 3 lows in the area of 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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