EUR/USD remains vulnerable amid France political drama
- The Euro retreats below 1.1620 against the US Dollar after rejection at the 1.1650 area.
- Euro's upside attempts remain frail with concerns about France's political turmoil weighing.
- The focus will be on Fed Powell's speech as the US shutdown delays economic data releases.
EUR/USD turns lower and trades below 1.1620 at the time of writing, drawing closer to the 1.1600 support area, after being capped around 1.1650 at the European session opening on Thursday. Euro's (EUR) upside attempts remain frail, as France's political uncertainty keeps investors on their toes.
France's outgoing Prime Minister (PM) Sébastien Lecornu calmed markets on Wednesday, stating that President Emmanuel Macron would announce a new PM in the next 48 hours and dismissing the opposition calls for new elections as, he said, there is no majority in the parliament for that.
In the US, the Government shutdown enters its eighth day with a lack of progress to restore funding, while news from the Federal Reserve (Fed) is the main fundamental driver amid the absence of key economic data releases. The Minutes of the last Fed meeting confirmed on Wednesday the bank's challenges to fine-tune its monetary policy, with employment weakening and inflation risks skewed to the upside.
Later on Thursday, more Fed policymakers, including Chairman Jerome Powell, will provide further clues about the bank's monetary policy plans. However, in the absence of key economic data, they are unlikely to change the market consensus of two more interest rate cuts in the remaining monetary policy meetings this year.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.01% | 0.02% | -0.08% | -0.39% | -0.16% | 0.02% | |
| EUR | 0.05% | 0.05% | 0.09% | -0.05% | -0.20% | -0.09% | -0.06% | |
| GBP | 0.00% | -0.05% | 0.00% | -0.07% | -0.26% | -0.10% | -0.06% | |
| JPY | -0.02% | -0.09% | 0.00% | -0.16% | -0.31% | -0.22% | -0.07% | |
| CAD | 0.08% | 0.05% | 0.07% | 0.16% | -0.23% | -0.07% | -0.04% | |
| AUD | 0.39% | 0.20% | 0.26% | 0.31% | 0.23% | 0.19% | 0.13% | |
| NZD | 0.16% | 0.09% | 0.10% | 0.22% | 0.07% | -0.19% | 0.03% | |
| CHF | -0.02% | 0.06% | 0.06% | 0.07% | 0.04% | -0.13% | -0.03% |
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: Improving mood offers respite for the Euro
- A somewhat brighter market sentiment has given some respite for the Euro on Thursday, but the negative trend remains intact. French President Macron is expected to appoint a new Prime Minister, but he will face the same challenges as the previous five PMs to solve the country's budget problems.
- German Trade Balance recorded a larger-than-expected surplus of EUR 17.2 billion in August, from EUR 14.2 billion in July. However, the increase was mainly due to a 1.3% drop in imports, which offset a 0.5% decline in exports, which fell against expectations for the second consecutive month.
- These figures come after a 4.3% decline in German Industrial Production in August, as reported on Wednesday, to confirm the soft momentum of the region's leading economy, adding pressure to an already weak Euro.
- In the US, the Minutes of September's Fed monetary policy meeting confirmed on Wednesday the divergence among policymakers on how much easing is needed to support economic growth without boosting inflation. The dot-plot, included in the Fed's Summary of Economic Projections released on September 17, showed a 10 to 9 vote for at least two more rate cuts this year.
- On the geopolitical front, Israel and Hamas have agreed to a ceasefire that is expected to lead to the release of the hostages and the reconstruction of war-torn Gaza. Although the agreement seems fragile, it has so far contributed to improving the market mood.
Technical Analysis: EUR/USD remains close to the 1.1600 support area
EUR/USD rallies are finding sellers, keeping the bearish trend in play. Previous support at 1.1650 is limiting upside attempts, with the 1.1600 support area dangerously close. The Relative Strength Index (RSI) remains well below 50, showing a significant bearish pressure.
The rejection at 1.1650 confirms that bears remain in control, although the support level at the 1.1600 area, where Wednesday´s lows meet the trendline support, is likely to be a tough one. 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 on Wednesday.
Immediate resistance is at the 1.1645-1.1650 area (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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