- The euro is under wide pressure in the midst of skepticism around the commercial pact between the US and the EU of the weekend.
- The markets see the agreement as economically biased in favor of the United States, increasing long -term pressure on European export sectors.
- The France Prime Minister qualifies the agreement as an act of “submission”, while the Minister of Commerce warns that Europe should not settle for “being less than an economic power.”
The euro (EUR) weakens in front of the Swiss Franco (CHF) on Monday while the markets evaluate the broader implications of the new commercial framework between the US and the EU. The euro is under wide pressure, since investors consider that the agreement is unilateral and economically taxed for the European Union (EU).
The EUR/CHF cross extends its intra -decrease during the US hours of negotiation, pressed by the persistent weakness of the euro and the constant demand of the Swiss Franco. At the time of writing, the torque is around 0.9315, with a drop of almost 0.22% in the day.
The agreement, announced on Sunday after conversations between US President Donald Trump and the president of the European Commission Ursula von der Leyen, imposes a 15% fixed tariff on a wide range of exports of the EU, replacing the tax of 30% previously threatened. In return, the EU has committed to buy 250,000 million dollars in American liquefied natural gas (LNG) annually, totaling approximately 750,000 million dollars in three years. The agreement also details an investment package of 600,000 million dollars from the EU in the US, focused on strategic sectors such as clean energy, defense and manufacturing equipment. However, the agreement maintains the existing tariffs on steel and aluminum in 50%, and officials hinted that a installment -based system could replace them in future negotiations.
While the agreement helped to avoid an immediate commercial war, many fear that the long -term competitiveness of the main European industries can harm. The agreement has already raised criticism within the EU, especially from France, adding uncertainty to the market.
French prime minister François Bayrou described the agreement as an act of “submission” and a “dark day for Europe”, warning that EU’s long -term economic power and economic power may have been compromised. Commerce Minister Laurent Saint-Martin told Franceinter radio on Monday that he did not want Paris “to settle for what happened yesterday because that would be to accept that Europe is not an economic power.” “This agreement is not balanced, so we will have to continue working,” he said.
From a technical perspective, the EUR/CHF is going down, quoting around 0.9316, since the bearish impulse resurfaces after a rejection near the simple mobile average (SMA) of 20 days, which also serves as the Bollinger average band at 0.9327. Despite the modest decrease, the broader trend remains dim, reflecting the prolonged period of consolidation of the torque.
In a broader perspective, the EUR/CHF has been caught in a narrow range between 0.9430 and 0.9300 since the end of April, unable to maintain a directional impulse in any direction. Repeated attempts to break over the roof of 0.9430 have failed, while falls to the 0.9300 floor have consistently found buyers. Bollinger’s bands are compressing, a sign of decreased volatility and potential for eventual rupture. The Relative Force Index (RSI) is 45.84, showing a slight bearish inclination without entering over -sales territory, while the average directional index (ADX) in 21.14 indicates a weak force force, in line with the range structure.
A sustained rupture below the support level of 0.9300 would mark a bassist change, potentially exposing levels down around 0.9250. On the contrary, a rebound from the current levels and a closure above the 20 -day SMA could see at the crossroads reinct the upper limit of the range about 0.9430, with the following resistance seen in the psychological level of 0.9500.
EURO – FREQUENT QUESTIONS
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
