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- EUR/USD revisits seven-month high around 1.1000 ahead of US inflation
EUR/USD revisits seven-month high around 1.1000 ahead of US inflation
- EUR/USD exhibits sheer strength near 1.1000 as the US Dollar weakens as Fed rate-cut bets increase.
- The Euro gains on expectations that the ECB will cut interest rates more gradually.
- Investors await the US inflation data for fresh guidance on interest rates.
EUR/USD clings to gains around the psychological resistance of 1.1000 in Wednesday’s European session, its highest level in around seven months. The major currency pair strengthens as the near-term outlook of the US Dollar (USD) is subdued due to firm speculation that the Federal Reserve (Fed) will start reducing interest rates in September.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near a weekly low at 102.55.
Market expectations for Fed interest rate cuts in September strengthened further after the United States (US) Producer Price Index (PPI) report for July indicated that price pressures are on track to return to the desired rate of 2%. Headline and core PPI, which strips of volatile food and energy items, softened on a monthly as well as annual basis. This suggests that producers are losing pricing power due to deteriorating demand conditions.
On the interest rate guidance, Atlanta Fed Bank President Raphael Bostic said on Tuesday that recent has increased its confidence that inflation will return to 2% but he wants a little more evidence to endorse interest rate cuts.
For more evidence, market participants will focus on the US Consumer Price Index (CPI) data for July, which will be published at 12:30 GMT. The CPI report is expected to show that monthly headline and core inflation rose by 0.2%. Annual headline and core CPI are estimated to have decelerated by one-tenth to 2.9% and 3.2%, respectively.
A soft inflation reading would boost expectations for Fed interest rate cuts. Also, it can improve speculation that the Fed will reduce its key borrowing rates aggressively. On the contrary, hot inflation numbers would dampen the same.
Daily digest market movers: EUR/USD strengthens on firm Euro
- EUR/USD reclaims a seven-month high of slightly above 1.1000 in Wednesday’s European session. The major currency pair is upbeat due to the outperformance of the Euro (EUR) against its major peers. The Euro performs strongly on expectations that the European Central Bank (ECB) will cut its key borrowing rates further, although in a gradual manner.
- The ECB started its policy-easing cycle in June after officials gained confidence that price pressures will return to bank’s target of 2% in 2025. However, policymakers continued to refrain from committing a pre-defined interest-rate cut approach as they worry that an aggressive expansionary monetary policy stance could re-accelerate inflation again.
- A Reuters poll carried out between August 8-13 showed that over 80% of respondents expect the ECB to cut interest rates two more times this year, one in September and the other in December.
- On the economic front, investors await the revised estimates of flash Q2 Gross Domestic Product (GDP) and Employment Change data for the Eurozone, which will be published at 09:00 GMT. The Eurozone economy is anticipated to have expanded by 0.3%, in line with flash figures and the growth rate recorded in the first quarter of this year. Meanwhile, the Employment Change, a percentage measure that shows an increase in fresh payrolls, is seen rising at a slower pace of 0.2% from the prior release of 0.3%.
- Usually, the impact of revised estimates remains light, but its influence could be high on the Euro due to the absence of top-tier economic data in case there are any big revisions.
Euro Price Today:
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.
| EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | 0.14% | 0.34% | 0.41% | 0.17% | 0.27% | 1.34% | -0.12% | |
| USD | -0.14% | 0.19% | 0.25% | 0.04% | 0.05% | 1.21% | -0.26% | |
| GBP | -0.34% | -0.19% | 0.08% | -0.15% | -0.08% | 1.01% | -0.43% | |
| JPY | -0.41% | -0.25% | -0.08% | -0.20% | -0.14% | 0.94% | -0.46% | |
| CAD | -0.17% | -0.04% | 0.15% | 0.20% | 0.06% | 1.16% | -0.26% | |
| AUD | -0.27% | -0.05% | 0.08% | 0.14% | -0.06% | 1.06% | -0.38% | |
| NZD | -1.34% | -1.21% | -1.01% | -0.94% | -1.16% | -1.06% | -1.40% | |
| CHF | 0.12% | 0.26% | 0.43% | 0.46% | 0.26% | 0.38% | 1.40% |
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).
Technical Analysis: EUR/USD refreshes seven-month high slightly above 1.1000
EUR/USD posts a fresh seven-month high above 1.1000. The major currency pair strengthens after a breakout of the Channel formation on a daily time frame. The upward-sloping 20-day Exponential Moving Average (EMA) near 1.0900 suggests that the near-term outlook of the shared currency pair is bullish.
The 14-day Relative Strength Index (RSI) jumps into the 60.00-80.00 range, indicating that the momentum has leaned to the upside.
On the upside, the August 10, 2023, high at 1.1065 and the round-level resistance of 1.1100 will act as a major barricade for the Euro bulls.
Alternatively, a downside move below August 1 low at 1.0777 would drag the asset toward February low near 1.0700. A breakdown below the latter would expose it to the June 14 low at 1.0667.
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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