EUR/USD advances on risk appetite, Fed monetary easing hopes
- The Euro extends gains to levels near 1.1600 with Fed easing hopes weighing on the US Dollar.
- US Retail Sales disappointed on Tuesday and Producer Price Index remained steady.
- The possibility that a peace deal could be reached soon between Russia and Ukraine is giving support to the Euro.
EUR/USD appreciates for the third consecutive day on Wednesday, reaching levels right below the 1.1600 line from lows near 1.1500 earlier this week. Growing hopes that the US Federal Reserve (Fed) will ease its monetary policy at the December meeting, and the progress towards a peace deal between Russia and Ukraine, have underpinned demand for the common currency.
US economic data released on Tuesday revealed a weaker-than-expected increase in Retail Sales in September, while the Producer Price Index continued to grow at a steady pace. The Consumer Confidence deteriorated, with households wary about higher costs and sluggish job prospects. These figures reinforced market expectations of immediate Fed interest rate cuts, adding pressure on the US Dollar.
Meanwhile, US and Ukrainian representatives continue working on the roadmap for a peace plan. US President Donald Trump affirmed on Tuesday that the original plan has been "fine-tuned with additional input from both sides" and that he will send special envoy Steve Witkoff to meet Russian President Vladimir Putin next week. This news and the positive reaction from Ukrainian President Volodymyr Zelensky have contributed to improving market sentiment and provided additional support to the Euro.
In the economic calendar, the US Durable Goods and Initial Jobless Claims will attract attention during Wednesday's US trading session. Later on, European Central Bank (ECB) board member Philip Lane, and president Christine Lagarde are expected to meet the press.
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 | -0.20% | -0.22% | 0.06% | -0.20% | -0.61% | -1.18% | -0.31% | |
| EUR | 0.20% | -0.02% | 0.27% | 0.00% | -0.41% | -0.98% | -0.10% | |
| GBP | 0.22% | 0.02% | 0.29% | 0.03% | -0.39% | -0.96% | -0.08% | |
| JPY | -0.06% | -0.27% | -0.29% | -0.27% | -0.68% | -1.25% | -0.37% | |
| CAD | 0.20% | -0.00% | -0.03% | 0.27% | -0.42% | -1.00% | -0.11% | |
| AUD | 0.61% | 0.41% | 0.39% | 0.68% | 0.42% | -0.58% | 0.31% | |
| NZD | 1.18% | 0.98% | 0.96% | 1.25% | 1.00% | 0.58% | 0.89% | |
| CHF | 0.31% | 0.10% | 0.08% | 0.37% | 0.11% | -0.31% | -0.89% |
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).
Risk appetite and growing Fed easing hopes are weighing on the US Dollar
- The Euro is dragging support from a weaker US Dollar, as recent US figures boosted expectations of Fed interest rate cuts in December, while hopes of a peace agreement between Russia and Ukraine are contributing to improve market sentiment. Lower US Treasury yields are weighing on the US Dollar Index, which has depreciated about 0.6% over the last three days.
- On Tuesday, US Retail Sales data showed that consumption grew 0.2% in September, undershooting expectations of a 0.4% increase, and following a 0.6% growth in August. Excluding automobiles, sales of all other products rose 0.3%, also below the 0.4% consensus, while August's reading was revised down to 0.6% from the previously estimated 0.7% increase.
- The US Producer Prices Index (PPI) grew 0.3% in September after a 0.1% contraction in August. Year-on-year producer inflation remained steady at 2.7%, in line with the market consensus. The core PPI, on the other hand, eased to a 2.6% yearly pace from 2.9% in August, beating expectations of a 2.7% reading.
- The US Conference Board's Consumer Confidence Index fell to a six-month lows of 88.7 in November from an upwardly revised 95.5 reading in October, completing a weakening picture of the US economic outlook and strengthening the case for further Fed monetary policy easing.
- In Europe, figures from Germany released on Tuesday failed to support the Euro. The Q3 final Gross Domestic Product (GDP) release confirmed a stalled economy, with a 0% quarterly growth, following a 0.3% contraction in Q2. Year-on-year, the German economy ticked up to a 0.3% growth from 0.2% in the second quarter.
- In the US, Kevin Hassett, the National Economic Council (NEC) Director, emerges as the best positioned to replace Jerome Powell as Fed Chair at the end of his term in May. Hasset has advocated for the need to cut interest rates to support economic growth and is expected to pursue a looser monetary policy. This news has added pressure on the US Dollar.
- On Wednesday, US Durable Goods Orders growth is expected to have slowed down to 0.3% in September, from 2.9% in August. Excluding transportation, orders are seen growing at a 0.2% pace, following a downwardly revised 0.3% in August.
- US Initial Jobless Claims are seen increasing to 225,000 from 220,000 in the week of November 21.
Technical Analysis: EUR/USD under growing bullish pressure near 1.1600
The EUR/USD bulls have taken control after breaching the 1.1550 resistance area and are testing the 1.1600 level, which, so far, remains in place. Technical indicators show an improving momentum. The 4-hour Relative Strength Index (RSI) is nearing oversold levels but not yet there, while the Moving Average Convergence Divergence (MACD) has crossed above the zero line, highlighting an improving bullish momentum.
Bulls remain capped below the mentioned resistance area above 1.1600 (November 18 and 19 highs). Further up, bulls are likely to be challenged at the top of a descending channel from the mid-October highs, which is now around 1.1625, ahead of the October 28 and 29 highs, near 1.1670.
On the downside, the previous resistance at 1.1550 (November 21 and 24 highs) is expected to provide support ahead of the 1.1500 psychological level. A bearish reaction below here would increase pressure towards the November 5 lows, near 1.1470, and the bottom of the descending channel from early October highs, now around 1.1425.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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