EUR/USD drops to near 1.0800 as US Dollar advances ahead of economic data
|- EUR/USD declines due to increased risk aversion ahead of the ISM PMI release on Thursday.
- The US Dollar recovers intraday losses as Treasury yields rebound from multi-month lows.
- The downside of the Euro could be limited as the latest inflation data raised doubt on potential ECB rate cuts.
EUR/USD depreciates to near 1.0790 during the European session on Thursday. This decline is attributed to the improved US Dollar (USD) due to a recovery in US Treasury yields ahead of US key economic data including ISM Manufacturing PMI and weekly Initial Jobless Claims, both set to be released later in the North American session.
However, the US Dollar faced challenges due to the dovish sentiment surrounding the Federal Reserve’s (Fed) policy trajectory. Fed decided to keep rates unchanged in the 5.25%-5.50% range at its July meeting on Wednesday.
During a press conference post-interest rate decision, Federal Reserve Chair Jerome Powell stated that a rate cut in September is "on the table," while the Federal Open Market Committee (FOMC) did not want to commit to anything in the statement. Powell added that the central bank will closely monitor the labor market and remain vigilant for signs of a potential sharp downturn, per Reuters.
Across the pond, HCOB Eurozone Manufacturing Purchasing Managers Index (PMI) posted a reading of 45.8 for July, slightly above the expected and prior readings of 45.6, data showed on Thursday. Moreover, on Wednesday, the Harmonised Index of Consumer Prices (HICP) in the Eurozone rose by 2.6% YoY in July, compared to 2.5% in the previous month. This figure exceeded the estimation of 2.4%.
The latest inflation report in the eurozone raised doubt on potential European Central Bank (ECB) interest rate cuts in September. The Euro may attract some buyers due to the diminished odds of the ECB cutting interest rates at its meeting on September 14.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.56% | -0.28% | 0.18% | 0.37% | 0.13% | -0.27% | |
| EUR | -0.38% | 0.18% | -0.65% | -0.21% | -0.00% | -0.25% | -0.65% | |
| GBP | -0.56% | -0.18% | -0.82% | -0.38% | -0.18% | -0.42% | -0.82% | |
| JPY | 0.28% | 0.65% | 0.82% | 0.43% | 0.63% | 0.33% | -0.05% | |
| CAD | -0.18% | 0.21% | 0.38% | -0.43% | 0.21% | -0.04% | -0.44% | |
| AUD | -0.37% | 0.00% | 0.18% | -0.63% | -0.21% | -0.24% | -0.63% | |
| NZD | -0.13% | 0.25% | 0.42% | -0.33% | 0.04% | 0.24% | -0.39% | |
| CHF | 0.27% | 0.65% | 0.82% | 0.05% | 0.44% | 0.63% | 0.39% |
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).
Euro FAQs
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%).
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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