EUR/USD churns on indecisive Tuesday
|- EUR/USD held off further losses, but gains remain absent.
- Fed Meeting Minutes due on Wednesday to draw investor attention.
- Traders will be looking for good news on Thursday’s US CPI inflation update.
EUR/USD held steady on Tuesday, failing to recapture the 1.1000 handle but arresting Fiber’s recent backslide from the 1.1200 region. The Euro has shed two and a third of a percent against the US Dollar since reaching a one-year peak in late September, tumbling back into the 1.0950 region as markets bid the Greenback higher across the board.
European data remains on the tepid side for most of the trading week. The European Central Bank (ECB) is set for another rate call next week, leaving the economic calendar largely clear of pan-EU data until then.
The Federal Reserve’s (Fed) latest Meeting Minutes from the September rate cut meeting will be released on Wednesday, giving Greenback traders plenty to chew on. Markets widely hoped for a follow-up double rate cut in November after the Fed blew the doors open with a jumbo 50 bps rate trim in September. However, core inflation still holding above Fed target levels and US labor figures that wildly outran expectations last week have firmly depressed rate cut hopefuls.
According to the CME’s FedWatch Tool, rate markets see nearly 90% odds that the Fed will follow up September’s jumbo 50 bps rate cut with a more modest 25 bps on November 7. Fed officials widely telegraphed that a weakening in the US labor market would be required to push the Federal Reserve into further outsized rate trims.
In addition, another round of US inflation figures is due on Thursday, with the release of September’s US Consumer Price Index (CPI). Core US CPI is expected to ease to 0.2% MoM from the previous 0.3%, while annualized headline CPI inflation is forecast to tick down to 2.3% YoY from the previous 2.5%.
EUR/USD price forecast
Fiber looks set to enter a bit of a sideways grind as daily candlesticks set up a consolidation pattern. The pair is trading in the dead zone between the 50-day and 200-day Exponential Moving Averages (EMA), but buyers are struggling to rebound after EUR/USD’s belly flop from north of the 1.1200 handle.
As long as sellers have run out of momentum, Euro bulls won’t have anything to fear from the 200-day EMA near 1.0900, while an extended bearish slide will send Fiber clattering back into 2024 lows near 1.0600.
EUR/USD daily chart
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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