EUR/USD holds steady as traders eye US-China talks, US CPI data
- EUR/USD retreats from 1.1447 high, trading flat near 1.1423 on Tuesday.
- US-China trade talks in London are described as “good” but lack concrete progress.
- ECB officials signal end of easing cycle; await clarity on tariff impact.
- US CPI data and ECB’s Wage Tracker could drive the next major move.
EUR/USD remains stable during Tuesday’s North American session as investors await updates on US-China trade talks in London and the release of the latest inflation figures in the United States (US). At the time of writing, the pair is trading at 1.1423, virtually unchanged.
Washington and Beijing continued their second day of discussions, which, despite being touted as “good” by US President Donald Trump, are failing to sustain traders’ upbeat mood. Meanwhile, speculation that both sides would reach common ground to ease tensions boosted the US Dollar (USD).
Among the themes discussed between the two parties are rare earths, chip exports and student visas. In the meantime, traders digested the latest data releases, as small business sentiment in the US improved, as revealed by the National Federation of Independent Business (NFIB) Optimism Index.
Across the pond, the Eurozone Sentix Investor's Confidence improved in June, as the index turned positive for the first time in the year. European Central Bank (ECB) officials crossed the wires, with Yannis Stournaras saying that stable European Union (EU) policy drew investors towards the Euro.
ECB’s Boris Vujcic said that they couldn’t say if US tariffs are disinflationary or inflationary, adding that the ECB could await new projections. ECB’s Olli Rehn favors the idea of a meeting-by-meeting approach, and Francois Villeroy commented that the ECB has successfully normalized policy.
Therefore, the recent twist on Villeroy's comments, along with President Christine Lagarde's comments that rates are near the end of the easing cycle, could push the EUR/USD higher.
Traders' eyes are on the US inflation report, ECB speakers and Wage Tracker.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | 0.25% | 0.06% | -0.03% | -0.31% | -0.37% | 0.11% | |
| EUR | 0.23% | 0.46% | 0.28% | 0.18% | -0.06% | -0.15% | 0.32% | |
| GBP | -0.25% | -0.46% | -0.10% | -0.27% | -0.51% | -0.61% | -0.14% | |
| JPY | -0.06% | -0.28% | 0.10% | -0.09% | -0.42% | -0.49% | -0.07% | |
| CAD | 0.03% | -0.18% | 0.27% | 0.09% | -0.30% | -0.34% | 0.14% | |
| AUD | 0.31% | 0.06% | 0.51% | 0.42% | 0.30% | -0.09% | 0.39% | |
| NZD | 0.37% | 0.15% | 0.61% | 0.49% | 0.34% | 0.09% | 0.48% | |
| CHF | -0.11% | -0.32% | 0.14% | 0.07% | -0.14% | -0.39% | -0.48% |
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: EUR/USD trade choppy ahead of US inflation report
- The US NFIB Optimism Index climbed from 95.8 in April to 98.8 in May, surpassing its long-term average. This marked the end of a four-month decline in sentiment and conditions for US small businesses, which had been weighed down by uncertainty surrounding tariffs.
- The US Consumer Price Index (CPI) is expected to climb by 2.5% YoY in May, up from 2.3%, while Core CPI, which excludes food and energy, is expected to edge higher from 2.8% to 2.9% YoY, signaling stickier inflationary pressures.
- The EU’s Sentix Confidence Index improved by 0.2% in June after plunging to -8.1 in May and -19.5 in April.
- Financial market players do not expect that the ECB would reduce its Deposit Facility Rate by 25 basis points (bps) at the July monetary policy meeting.
Euro technical outlook: EUR/USD clings to 1.1400 as buyers lose steam
EUR/USD price action suggests the uptrend remains in play, but so far, buyers have failed to clear the 1.15 figure, which would immediately expose the current year-to-date (YTD) high of 1.1572. Momentum, as measured by the Relative Strength Index (RSI), suggests that consolidation lies ahead, as buyers take a respite.
On the other hand, bears would step in if EUR/USD drops below the 20-day Simple Moving Average (SMA) of 1.1331, clearing the path for a challenge of 1.13 and the 50-day SMA at 1.1281.
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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