- EUR/USD rises closer to 1,1350 while the US dollar is still under pressure due to Moody’s reduction to the US credit rating.
- The US president Trump fails to convince legislators to support the tax cuts bill.
- The euro gains ground while Trump confirms truce conversations between Russia and Ukraine.
EUR/USD jumps about 1,1350 on Wednesday, extending its winning streak for the third day of negotiation. The main currency pair is strengthened while the US dollar (USD) continues to face strong sales pressure amid the erosion of the United States credit rating (USA). The dollar index (DXY), which follows the value of the dollar against six main currencies, recovers some of its initial losses, but there is still 0.3% down, about 99.70.
Moody’s reduced the sovereign credit rating of the US to AAA from AA1 on Friday, following tax imbalances and increasing obligations of interest rates, a movement that added concerns about the credibility of the US dollar. The credit qualification agency also showed concern about a probable increase in the current debt load of 36 billion dollars, with the US president Donald Trump seeking to approve a new tax bill of between 3 billion and 5 billion dollars.
Meanwhile, the US president Trump failed to convince Republican legislators at a closed meeting in Capitol Hill on Tuesday to support the new fiscal bill through which he seeks to comply with his economic agenda. The Republicans refused to support the draft tax cuts bill as they disseminated on the “increased limits in deductions for state and local tax payments,” said Republican Republican Republican Mike Lawler, Reuters reported.
In the Economic Front, investors expect the preliminary data of the Global S&P S&P (PMI) index index for May, which will be published on Thursday. PMI data is expected to show that general business activity expanded at a constant pace. Investors will pay special attention to employers’ comments in the private sector about whether they are opting for capacity expansion or if they are comfortable with expensive imports due to the repercussions of the White House tariff policy.
Federal Reserve officials (FED) have indicated that the imposition of new economic policies by the US president Trump is expected to disagree inflation, a scenario that discourages the central bank to reduce interest rates. On Tuesday, the president of the Bank of the Federal Reserve of St. Louis, Alberto Musalem, said: “If inflation expectations are disagree, the Fed policy should prioritize price stability.” Musalem guided that monetary policy is currently “well positioned” since the uncertainty of economic policy is “unusually high“
Daily summary of market movements: EUR/USD gains ground while the euro exceeds
- The pure force in the EUR/USD is also driven by the superior yield of the euro (EUR). The main currency works strongly in front of all its main peers on Wednesday, since investors become optimistic about a truce between Russia and Ukraine. The US president Trump confirmed the conversations of Alto El Fuego between Russia and Ukraine in the city of the Vatican through a publication in Truth.Social. “Russia and Ukraine will begin immediately negotiations towards a high fire,” Trump said.
- A high fire between Russia and Ukraine will be a favorable scenario for the euro (EUR) as it will relieve interruptions in the supply chain throughout Europe.
- In the front of the monetary policy, the operators remain increasingly confident that the European Central Bank (ECB) will reduce interest rates at the June policy meeting. The reason behind the firm dovish bets of the ECB is the orientation of a series of officials that inflation is on its way to returning to the target of the central bank of 2%.
- However, the Governing Council member of the ECB, Klaas Knot, said Tuesday that the medium -term inflation perspective is too uncertain to say if the ECB needs to cut the key rates again in June. “I can’t exclude that we decide to have another rate cut in June, but I can’t confirm it either,” said Knot, according to Reuters.
- This week, the spring forecast report of the Executive Arm of the European Union (EU) also showed that inflation will return to the goal of 2% in the middle of the year. The report also showed that price pressures will average 1.7% in 2026, a scenario that reflects downward risks for inflation.
- In the Economic Front, investors expect HCOB PMI data for the Eurozone and its main states, which will be published on Thursday. According to preliminary estimates, general business activity is expected to have grown at a faster rate than seen in April.
Technical analysis: EUR/USD rises to about 1,1350
EUR/USD jumps about 1,1350 on Wednesday, the highest level seen in two weeks. The short -term perspective of the torque is bullish since it maintains the exponential (EMA) mobile average of 20 days, which is around 1,1240.
The relative force index (RSI) of 14 periods oscillates within the range of 40.00-60.00, suggesting indecision among the operators.
Looking up, the maximum of April 28, 1,1425 will be the main resistance for the pair. On the contrary, the psychological level of 1.1000 will be a key support for the euros of the euro.
Euro Faqs
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.
