- EUR/USD drove further into fresh highs for the year on Wednesday.
- FOMC looks more likely to lean into September rate cuts after Meeting Minutes release.
- EU, US PMI figures still loom ahead on Thursday, as well as Jackson Hole.
EUR/USD pushed further into the high end on Wednesday, breaching 1.1150 and finding fresh 13-month highs on approach to 1.1200 as Fiber bids surges on broad Greenback weakness. The US Dollar is softer across the board in the midweek market session as investors continue to pile into bets that the Federal Reserve (Fed) will be forced to kick off a rate-cutting cycle in September.
Read more: Fed Minutes leave the door open to a September rate cut
According to the Fed’s latest Meeting Minutes, policymakers noted that discussions of when to deliver rate cuts to pleading market participants had already begin in July, further firming up odds of at least a quarter-point trim on September 18. In true market participant fashion, rate markets bolstered their bets of a double cut from the Federal Open Market Committee’s (FOMC) September meeting, with rate traders pricing in nearly 40% odds of a 50 bps trim on September 18.
Pan-European Purchasing Managers Index (PMI) activity survey results are expected early Thursday, with the EU Manufacturing and Services PMIs for August both expected to hold steady, at 45.8 and 51.9, respectively.
US Purchasing Manager Index (PMI) business activity survey results are slated for release on Thursday, as well as the kickoff of the annual Jackson Hole Symposium which is set to run through the weekend. Wednesday will deliver the Federal Reserve’s (Fed) latest Meeting Minutes, but market forces will broadly be looking ahead to Thursday’s outings for reasons to move.
US S&P Global Manufacturing PMI activity expectations are forecast to hold steady at 49.6 in August, while the Services PMI component is expected to tick down a full point to 54.0 from 55.0. The kickoff of the Jackson Hole Symposium is expected to draw plenty of investor attention on Thursday, but Friday’s appearance from Fed Chairman Jerome Powell can be expected to set the overall tone of market sentiment heading into next week.
EUR/USD price forecast
Fiber found yet another peak bid for 2024 on Wednesday as bulls race toward 1.1200. EUR/USD is up over 3% in August alone, and the pair is poised for it’s best single-week performance since November of 2022.
Bullish momentum has broken the price action mold, with the pair up nearly 3.7% and climbing fast from the last swing low into 1.0777 at the beginning of August. The pair launched off of a technical floor at the 200-day Exponential Moving Average (EMA) which is currently rising into 1.0825.
EUR/USD daily chart
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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