- EUR/USD extends losses as Eurozone CPI moderates beyond expectations.
- US Factory Orders and JOLTS Job Openings are likely to challenge US Dollars recovery
- The US Dollar Index remains close to six-week lows at 98.60.
EUR/USD is accelerating its reversal from 1.1450 highs, returning to levels below 1.1400 at the time of writing. Eurozone Consumer Prices Index (CPI) reading for May has shown lower-than-expected inflationary pressures, which gives leeway to the ECB for further monetary easing to support the region’s economy.
The headline CPI stalled in May and the yearly rate fell below 2% for the first time in eight months, following a 2.2% reading seen in April. The Core CPI was also flat on the month and eased to 2.3% on a year-to-year basis, from 2.7% in the previous month, beating expectations of a shorter decline. to a 2.5% rate.
These figures will be welcomed by the European Central Bank (ECB), which is widely expected to cut interest rates for the eighth consecutive time on Thursday. ECB President Christine Lagarde will stick to her neutral tone, assuring that further decisions will depend on data, but the market is likely to price further rate cuts down the road, adding some pressure on the Euro.
The focus now turns to Factory Orders figures, due later today, which are likely to show a significant decline in April, on the aftermath of US President Donald Trump’s Liberation Day. Another weak reading, following Monday’s downbeat US Manufacturing PMI figures might curn a frail US Dollar’s recovery.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.14% | 0.03% | 0.12% | 0.55% | 0.55% | 0.05% | |
| EUR | -0.22% | -0.04% | -0.18% | -0.08% | 0.35% | 0.41% | -0.15% | |
| GBP | -0.14% | 0.04% | -0.12% | -0.04% | 0.40% | 0.45% | -0.10% | |
| JPY | -0.03% | 0.18% | 0.12% | 0.09% | 0.50% | 0.53% | 0.09% | |
| CAD | -0.12% | 0.08% | 0.04% | -0.09% | 0.38% | 0.49% | -0.06% | |
| AUD | -0.55% | -0.35% | -0.40% | -0.50% | -0.38% | 0.05% | -0.53% | |
| NZD | -0.55% | -0.41% | -0.45% | -0.53% | -0.49% | -0.05% | -0.55% | |
| CHF | -0.05% | 0.15% | 0.10% | -0.09% | 0.06% | 0.53% | 0.55% |
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: US Dollar weakness keeps Euro downside attempts limited
- The Euro maintains its broader positive trend intact, despite the recent US Dollar rebound. The US Dollar Index DXY returned below the 100.00 psychological level last week and has kept languishing below the 99.00 level so far.
- Eurozone data released on Tuesday also revealed that the Unemployment Rate eased to 6.2% in April, as expected, following an upwardly revised 6.3% rate in March.
- On Monday, US data showed that manufacturing activity deteriorated against expectations, with delivery times increasing. These figures have confirmed the negative impact of trade uncertainty on the sectors’ activity and triggered fears of supply chain disruptions.
- May’s US ISM Manufacturing PMI contracted to a six-month low of 48.5 from 48.7 in the previous month, against market expectations of an increase to 49.5. The new orders and employment subindexes edged up, while the prices paid declined. The US Dollar extended losses after the release.
- In Europe, May’s Manufacturing PMI confirmed the expected 49.4 reading, marking the fifth consecutive improvement in data, although still at levels consistent with a slight contraction of the sector’s activity.
- Germany’s PMI was revised down to a 48.3 reading, from the previously estimated 48.8, highlighting the soft momentum of the region’s major economy. The impact on the Euro, however, was muted.
- In the calendar today, the US Factory Orders will be observed with special interest after the soft manufacturing figures seen on Monday. New orders are expected to have dropped month-over-month (MoM) in April by 3%, following a 3.4% increase in March. The risk for the USD is skewed to the downside.
- Somewhat later, the US JOLTS Job Openings will kick off a string of labour market releases this week, which ends with the all-important US Nonfarm Payrolls on Friday. Job openings are expected to have remained steady at 7.1 million in April.
Technical analysis: EUR/USD fails to confirm above the 1.1435 resistance area
EUR/USD hit six-week highs at 1.1450 on Monday but failed to consolidate above the resistance area between 1.1415 and 1.1435, which has been holding bulls since mid-April.
The pair, however, maintains its positive trend intact, as the broad-based US Dollar weakness is keeping bears at bay for now. Immediate resistance is now at the 1.1450 reverse trendline, which closes the path towards the April 22 high, at 1.1545.
Failure to break 1.1450, on the contrary, might put the May 30 low at 1.1310 back in play ahead of the 1.1220 support area.
EUR/USD 4-Hour 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.