- Analytics
- News and Tools
- Market News
- Euro comes under mild pressure near 1.0950 ahead of ECB, Powell
Euro comes under mild pressure near 1.0950 ahead of ECB, Powell
- Euro starts Wednesday’s session slightly offered.
- Stocks in Europe open the session with decent advance.
- EUR/USD hovers around the 1.0950 region amidst risk-off mood.
- Germany’s Consumer Confidence worsens in July.
- Investors will closely follow events from the ECB Forum.
The recent two-day advance of the Euro (EUR) was somewhat limited due to renewed buying interest in the US Dollar (USD), leading to a partial retracement of the weekly gains for EUR/USD. As a result, the pair revisited the 1.0930 region early in the morning on Wednesday during the European session.
The stronger performance of the US Dollar also provided some relief to the USD Index (DXY), which had experienced negative performance earlier in the week. The index approached the 55-day SMA around 102.60.
The immediate reaction in the currency market can also be attributed to the lack of a clear direction in both the US and German bond markets. This uncertainty occurs amidst expectations of a quarter-point interest rate hike by both the European Central Bank (ECB) and the Federal Reserve (Fed) at their respective meetings in July.
The potential future actions of the Fed and the ECB in normalizing their monetary policies remain a topic of ongoing debate. This discussion takes place against the backdrop of increasing speculation about an economic slowdown on both sides of the Atlantic.
Regarding monetary policy, a notable event on Wednesday will be a Policy Discussion Panel at the ECB Forum on Central Banking in Sintra, Portugal. The panel will feature Chief Jerome Powell and ECB President Christine Lagarde, participating in the European afternoon.
In terms of data, consumer confidence in Germany, as measured by GfK, weakened to -25.4 for the month of July.
Across the Atlantic, the usual weekly Mortgage Applications tracked by the Mortgage Bankers Association (MBA) will be released, followed by preliminary figures for the Goods Trade Balance.
Daily digest market movers: Euro looks at ECB Forum for near-term direction
- The EUR runs out of steam on USD recovery.
- Germany’s Consumer Confidence disappoints expectations in July.
- ECB Lagarde-Fed Powell will take centre stage later on Wednesday.
- ECB’s De Guindos favours a rate hike in July.
- ECB’s Vujcic leaves the door open to a September hike.
Technical Analysis: Euro looks supported by the 55-day SMA
EUR/USD appears under pressure and should the selling bias gather impulse it could face initial support at the transitory 55-day SMA at 1.0883. The loss of this level exposes a deeper pullback to the June low at 1.0844 (June 23) ahead of the provisional 100-day SMA at 1.0814. South from here emerges the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).
If bulls regains the upper hand, the next hurdle is then expected at the June peak of 1.1012 (June 22) prior to the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. North from here emerges the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1181, just before another round level at 1.1200.
The constructive view of EUR/USD appears unchanged as long as the pair trades above the crucial 200-day SMA, today at 1.0578.
Euro FAQs
What is the Euro?
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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
