EUR/USD slips toward 1.16 as Dollar strengthens on easing US–China tensions
- Euro drops as the DXY climbs near 99.00, on geopolitics relief.
- Hopes of US government reopening and renewed trade dialogue lift sentiment for the Dollar.
- ECB’s Lagarde and De Guindos speeches in focus as Eurozone data flow remains subdued.
EUR/USD falls during the North American session, edges lower 0.31% as the Greenback remains bid as a sign of relief as US President Trump tempers his rhetoric on China. The pair trades at 1.1599 after reaching a high of 1.1655.
Greenback gains as Trump signals trade talks with Xi and government shutdown optimism builds
The shared currency treads water as the US Dollar Index (DXY), which tracks the buck’s value against a basket of six peers, is up 0.37% at 98.95 amid the lack of US economic data as the government shutdown seems poised to extend. Meanwhile, Kevin Hasset, the White House economic advisor, said that the shutdown could end “sometime this week.”
The US Senate Minority Leader Schumer said that the Democrat House leader Jeffries and him reached out to Trump on Tuesday to sit down and negotiate, a possible reopening of the government.
Aside from this, the US Dollar was also boosted by news that US President Donald Trump will meet the Chinese President Xi Jinping next week, in an effort to improve trade negotiations ahead of the end of the second 90-day trade truce that will end on November 10.
The US economic docket remains absent for Wednesday and Thursday, but the Bureau of Labor Statistics (BLS) will reveal September’s inflation report in the United States. In Europe, traders await speeches by the European Central Bank (ECB) Vice-President Luis De Guindos and the President Christine Lagarde.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.54% | 0.46% | 0.90% | 0.03% | 0.00% | -0.06% | 0.50% | |
| EUR | -0.54% | -0.08% | 0.42% | -0.51% | -0.43% | -0.68% | -0.03% | |
| GBP | -0.46% | 0.08% | 0.26% | -0.43% | -0.35% | -0.60% | 0.03% | |
| JPY | -0.90% | -0.42% | -0.26% | -0.89% | -0.91% | -1.04% | -0.49% | |
| CAD | -0.03% | 0.51% | 0.43% | 0.89% | 0.02% | -0.17% | 0.46% | |
| AUD | -0.01% | 0.43% | 0.35% | 0.91% | -0.02% | -0.25% | 0.38% | |
| NZD | 0.06% | 0.68% | 0.60% | 1.04% | 0.17% | 0.25% | 0.63% | |
| CHF | -0.50% | 0.03% | -0.03% | 0.49% | -0.46% | -0.38% | -0.63% |
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 market movers: Euro on the defensive as traders wait for fresh catalysts
- Market participants are waiting for the release of US CPI ahead of next week’s Federal Reserve monetary policy decision. The US central bank is expected to cut rates 25 basis points to the 3.75% - 4% range, with traders already pricing an additional 0.25% reduction for the December meeting.
- ECB’s Chief Economist Philip Lane said that Euro Zone banks may be pressured if US Dollar funding were to dry up amid concerns over Trump’s policies. Dollar funding has been on central bankers’ minds since Trump announced trade tariffs.
- Next week, the ECB is expected to hold rates unchanged, with odds standing at 98%.
- Meanwhile, the delay of the resolution of the Russia – Ukraine’s conflict, could weigh on the Euro, despite Trump’s efforts to reach a deal, between Russian President Vladimir Putin and Ukraine’s Volodymyr Zelenskyy.
Technical outlook: EUR/USD meanders at around 1.1600, further downside expected
EUR/USD’s technical outlook has slightly improved, though the pair remains neutral to bearish as it trades below the 100-day Simple Moving Average (SMA) at 1.1654. The Relative Strength Index (RSI) dipped under the neutral 50 mark last Friday, indicating strengthening downside momentum.
Key support sits at 1.1600, followed by 1.1550 and 1.1500. A decisive break below these levels would expose the August 1 cycle low near 1.1391. On the flip side, resistance is seen at 1.1650 and 1.1700, with a sustained move above the latter paving the way for 1.1800 and the July 1 high at 1.1830.
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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