EUR/USD retreats from highs with all eyes on Eurozone inflation
- The Euro holds above 1.1600 against the US Dollar after rejection at the 1.1650 area on Monday
- A global bond sell-off boosted US Treasury yields and provided some support for the USD.
- Eurozone inflation and unemployment figures will drive markets on Tuesday.
EUR/USD is practically flat on Tuesday, trading at 1.1610 at the time of writing, after retreating from two-week highs above 1.1650 the previous day. The US Dollar (USD) has bounced up from lows, amid a cautious market mood, with investors awaiting the release of the Eurozone's preliminary Harmonized Index of Consumer Prices (HICP) and the Unemployment Rate.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of six major peers, found some footing on Monday, in spite of a weak US ISM Manufacturing Purchasing Managers' Index (PMI), which showed that the sector's activity contracted for the ninth consecutive month, with new orders and employment declining and inflationary pressures rising.
The Bank of Japan (BoJ) Governour Kazuo Ueda rattled markets on Monday, hinting at a rate hike in December. The comments triggered a global sell-off in bond markets, which sent US Treasury yields higher and provided some support to an ailing US Dollar.
A well-received auction of Japanese Government Bonds earlier on Tuesday has somewhat eased fears, although the mood remains cautious. The US economic calendar is thin today, and the focus will remain on the ISM Services PMI and the ADP Employment Change report, due on Wednesday.
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 | -0.02% | -0.02% | 0.20% | -0.03% | -0.18% | -0.02% | -0.08% | |
| EUR | 0.02% | 0.00% | 0.22% | -0.01% | -0.16% | -0.00% | -0.06% | |
| GBP | 0.02% | -0.00% | 0.21% | -0.02% | -0.18% | -0.00% | -0.06% | |
| JPY | -0.20% | -0.22% | -0.21% | -0.22% | -0.37% | -0.22% | -0.27% | |
| CAD | 0.03% | 0.01% | 0.02% | 0.22% | -0.14% | 0.01% | -0.04% | |
| AUD | 0.18% | 0.16% | 0.18% | 0.37% | 0.14% | 0.16% | 0.10% | |
| NZD | 0.02% | 0.00% | 0.00% | 0.22% | -0.01% | -0.16% | -0.05% | |
| CHF | 0.08% | 0.06% | 0.06% | 0.27% | 0.04% | -0.10% | 0.05% |
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: Fed easing hopes are likely to weigh on the USD
- The US Dollar bounces up from lows on Tuesday, favoured by risk-off markets amid a global sell-off in government bonds. Upside attempts, however, are likely to remain limited, as investors are convinced that the Federal Reserve (Fed) will cut interest rates in December and, highly likely, a few more times in 2026.
- In the economic calendar on Tuesday, the main attraction will be the Eurozone's consumer inflation, as measured by the HICP, which is expected to have grown at a steady 2.1% yearly rate in November, while the core HICP is sen accelerate to a 2.5% year-on-year pace from 2.4% in October. These figures, however, are unlikely to alter the European Central Bank's (ECB) stance, which points to steady interest rates for the foreseeable future.
- Eurozone's Unemployment Rate is also out on Tuesday. The market consensus anticipates a 6.3% reading in October, unchanged from the previous month.
- On Monday, the US ISM Manufacturing PMI revealed that the sector's activity further contracted in November, with the index easing to 48.2 from 48.7 in October, well below the 48.6 expected. New Orders Index fell to 47.4 from 49.4, and the Employment Index dropped to 44 in November from 46 in October. The Prices Paid gauge rose to 58.5 from 58.0, underscoring the inflationary impact from trade tariffs.
- In the Eurozone, manufacturing activity data was also disappointing. The final HCOB Manufacturing PMI was revised down to a five-month low of 49.6 in November, from previous estimates of 49.7, following the standstill level of 50.0 in October.
Technical Analysis: EUR/USD keeps pushing against the 1.1615 resistance area
EUR/USD has pulled back from 1.1650 highs, but the immediate bias remains bullish. The pair is attempting to break and consolidate above a trendline resistance at 1.1615, with technical indicators mixed on the 4-hour chart. The Relative Strength Index (RSI) remains in bullish territory near the 60.0 level, while the Moving Average Convergence Divergence (MACD) indicator keeps hovering around the signal line, which highlights a weak momentum.
Above 1.1615, bulls are likely to be challenged at the 1.1660-1.1670 area (October 28, 29, November 13, 14 highs). Further up, the next target is the October 17 high, right below 1.1730, although it seems too distant for Tuesday's session.
On the downside, the pair has been finding support at the 1.1600-1.1590 area (Monday's low, Intraday low), ahead of the 1.1550 area, which held the bears on November 26 and 28. Further down, the 1.1500 psychological level and the November 5 lows, near 1.1470, will come into play.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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