EUR/USD falls to one-month lows on political fears, risk-off markets
- The Euro depreciates for the third consecutive day, reaching levels near 1.1600.
- The political impasse in France keeps the Euro under pressure.
- The lack of progress to restore US government funding is starting to boost the Dollar on risk-averse flows.
EUR/USD heads lower for the third consecutive day on Wednesday, to reach its lowest levels since early September. The pair trades at the 1,1615 area at the time of writing, as concerns about France's political and fiscal situation and fears of a protracted shutdown of the US government have crushed investors' appetite for risk.
In Europe, pressure on French President Emmanuel Macron to call a snap election mounts amid growing criticism from his own ranks. Former allies have joined the demands of opposition parties to call elections or resign, and rating agencies have warned of a further downgrade of France's sovereign credit status if the political impasse drags on.
Across the Atlantic, the political scenario is not much better. US Senate Democratic and Republican leaders remain unable to find a way to restart funding as the shutdown enters its second week, and hopes of a breakthrough this week have fallen to 23% according to a poll by Polymarket. The lack of progress has started to erode market sentiment, boosting demand for the US Dollar and other traditional safe havens.
On Wednesday's economic calendar, the minutes of the last Federal Reserve (Fed) meeting will be the main diversion from the political drama. During the European session, European Central Bank (ECB) policymakers, including President Christine Lagarde, will take the stage, and some Fed officials are expected to speak during the US session.
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 | 0.37% | 0.33% | 0.32% | 0.15% | 0.32% | 0.98% | 0.38% | |
| EUR | -0.37% | -0.04% | -0.02% | -0.21% | -0.07% | 0.65% | 0.00% | |
| GBP | -0.33% | 0.04% | 0.02% | -0.15% | 0.02% | 0.69% | 0.06% | |
| JPY | -0.32% | 0.02% | -0.02% | -0.22% | -0.02% | 0.59% | -0.00% | |
| CAD | -0.15% | 0.21% | 0.15% | 0.22% | 0.16% | 0.83% | 0.22% | |
| AUD | -0.32% | 0.07% | -0.02% | 0.02% | -0.16% | 0.67% | 0.08% | |
| NZD | -0.98% | -0.65% | -0.69% | -0.59% | -0.83% | -0.67% | -0.61% | |
| CHF | -0.38% | -0.01% | -0.06% | 0.00% | -0.22% | -0.08% | 0.61% |
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: Political uncertainty hurts the Euro
- The growing political uncertainty in France is bleeding the Euro this week, while investors' concerns about a prolonged shutdown of the US federal government have started to hurt market sentiment and boost demand for the safe-haven USD. In the absence of key macroeconomic data to alter this view, the bearish EUR/USD trend has further room to go.
- On Tuesday, ECB President Christine Lagarde reiterated that the disinflationary process in the Eurozone has been completed and that she is hopeful that France will meet its international commitments and produce a budget in time.
- Eurozone data has failed to improve investors' sentiment. German Factory Orders figures showed a 0.8% decline in August, against market expectations of a 1.4% growth, following a 2.7% contraction in July. Year-on-year, orders have increased at a 1.5% rate, after a 3.3% fall in July.
- Fed policymakers continue showing their divergences. Minneapolis Fed President Neel Kashkari has warned about a burst of inflation if the bank lowers rates too fast, while US President Donald Trump's latest appointment, Fed Governor Stephen Miran, stated that inflation is due to population increases and reiterated that monetary policy needs to ease.
Technical Analysis: EUR/USD is testing support at the 1.1610 area
The EUR/USD technical picture reflects strong bearish pressure. The 4-hour chart Relative Strength Index (RSI) is low but not yet at oversold levels, and the Moving Average Convergence Divergence (MACD) remains well below the signal line, with red histogram bars increasing, suggesting that further depreciation is likely.
Bears are now testing support at the 1.1610 area, where the pair was contained the price on September 2 and 3. Further down, the target would be the August 22 and 27 lows, near 1.1575, and then the August 5 low at 1.1530, although this latter level seems out of reach for this Wednesday.
Upside attempts are likely to be challenged at the previous support area of 1.1645 (September 25 and October 6 lows), ahead of the descending trendline resistance, now around 1.1720. A break of this level would suggest a trend shift and bring last week's highs at the 1.1765-1.1775 area into focus.
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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