EUR/USD hovers around 1.0800 after pulling back from the weekly high, FOMC Minutes awaited
- EUR/USD trims intraday gains to halt its winning streak on Wednesday.
- Euro receives pressure, possibly due to market caution ahead of FOMC minutes.
- Traders await HCOB PMI data from the Eurozone and Germany due on Thursday.
- US Dollar recovers daily losses on the back of improved US bond yields.
The EUR/USD pair trims its intraday gains on Wednesday and faces challenges in extending its winning streak initiated on February 14. The pair experienced upward movement during the Asian session, attributed to a weaker US Dollar (USD) influenced by subdued US Treasury yields. Traders are likely awaiting the release of the Federal Open Market Committee (FOMC) Minutes later in the North American session to gain additional insights into the Federal Reserve's (Fed) position on interest rates.
The Euro receives pressure, possibly due to market caution amidst diminished expectations for early interest rate cuts worldwide. However, China's decision to lower its five-year Loan Prime Rate (LPR) by 25 basis points (bps) to support its economy might provide some support for the Euro, particularly given the close trade ties between China and the Eurozone. Traders are expected to closely monitor the HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany, slated for release on Thursday.
The US Dollar Index (DXY), which gauges the US Dollar's value against six major currencies, holds steady at around 104.10, while the 2-year and 10-year yields on US Treasury coupons stand at 4.60% and 4.28%, respectively, at the time of writing. The US Federal Reserve is anticipated to uphold elevated policy rates for an extended duration to tackle persistent inflation concerns, especially following last week’s strong consumer and producer prices from the United States (US).
Daily digest market movers: EUR/USD depreciates on improved US Dollar
- The European Central Bank (ECB) released the seasonally adjusted Current Account, which improved to €31.9B in December from November’s reading of €22.5B. The non-seasonally adjusted Current Account increased to €42.7B from €31.7B prior.
- ECB Negotiated Wage Rates (QoQ) grew by 4.46% in the fourth quarter of 2023 against the prior quarter’s 4.69%. Last week, ECB President Christine Lagarde highlighted salaries as "an increasingly important driver of inflation dynamics in the coming quarters."
- Economists at ING analyze the EUR/USD pair’s outlook. Today's attention is on the Eurozone consumer confidence data for February, where a slight improvement is anticipated. Despite prevailing challenges, there's a hopeful sign for the Eurozone economy as wage growth seems to be outpacing inflation, potentially resulting in a boost from rising real incomes.
- According to the German Bundesbank Monthly Report, economists at Deutsche Bundesbank anticipate a general decline in the inflation rate in the upcoming months. The earlier timing of Easter this year compared to last year is expected to influence the prices of package holidays, consequently impacting the inflation rate.
- German Buba Monthly Report projected that inflation for food and other goods will likely decrease further in the coming months. However, price pressures in the services sector are expected to ease at a slower pace, primarily due to the sustained strength in wage growth.
- According to the CME FedWatch Tool, the probability of a Fed rate cut has significantly decreased to 8.5% for March and 30.7% for May. Instead, market sentiment is shifting towards the possibility of easing starting in June, with a likelihood of 54.3%.
- The Federal Reserve's dot plot for this year suggests an anticipation of 75 basis points in rate cuts, while the Fed funds futures market is pricing in approximately 89 basis points in cuts.
- ANZ anticipates that the Federal Reserve (Fed) will commence rate cuts from July 2024.
- 3-Month and 6-Month US Bills auctioned at 5.23% and 5.1%, respectively.
Technical Analysis: EUR/USD maintains its position around the key level of 1.0800
EUR/USD trades near 1.0790 on Wednesday, which is aligned with the key support at the 21-4hour Exponential Moving Average (EMA) at 1.0786 and the 38.2% Fibonacci retracement level at 1.0783. A break below this area could put pressure on the EUR/USD pair to test the major level of 1.0750.
The technical analysis of the EUR/USD pair reveals a 14-hour Relative Strength Index (RSI) above the 50 level. Moreover, the Moving Average Convergence Divergence (MACD) is situated above both the centerline and the signal line, providing confirmation of the bullish momentum.
On the upside, the EUR/USD pair could find immediate resistance at a psychological level of 1.0800. A breakthrough above this psychological barrier could provide upward support for the pair to retest the weekly high at 1.0838 recorded on Tuesday.
EUR/USD: Four-Hour Chart
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.11% | 0.12% | 0.04% | -0.01% | 0.09% | -0.26% | -0.14% | |
| EUR | -0.10% | 0.00% | -0.08% | -0.12% | -0.03% | -0.38% | -0.24% | |
| GBP | -0.11% | 0.00% | -0.07% | -0.13% | -0.02% | -0.37% | -0.25% | |
| CAD | -0.03% | 0.08% | 0.08% | -0.05% | 0.05% | -0.29% | -0.17% | |
| AUD | 0.02% | 0.13% | 0.11% | 0.06% | 0.10% | -0.25% | -0.13% | |
| JPY | -0.09% | 0.04% | 0.03% | -0.07% | -0.09% | -0.35% | -0.21% | |
| NZD | 0.27% | 0.38% | 0.38% | 0.31% | 0.24% | 0.36% | 0.13% | |
| CHF | 0.14% | 0.25% | 0.26% | 0.18% | 0.13% | 0.22% | -0.12% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Euro FAQs
What is the Euro?
The Euro is the currency for the 20 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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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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