- The EUR/USD recovers the intradic and bouncing losses above 1,0300, but the renewed fears of the tariffs of the president of the USA, Trump, maintain the uncertain perspective.
- The US president, Trump, is willing to impose 25% tariffs on all imports of aluminum and steel.
- Investors await the BCE Lagarde speech on Monday and Powell’s testimony of the Fed on Tuesday and Wednesday.
The EUR/USD is recovered above 1,0300 in the European session on Monday after a weak opening around 1,0280. The main currency opened with a weak note since investors rushed towards the safe shelter against the renewed fears of the tariffs of the president of the United States (USA), Donald Trump. The American dollar index (DXY), which tracks the value of the dollar against six main currencies, yields some of its intra -income profits but is still 0.15% higher, around 108.25.
During the weekend, President Trump threatened to increase 25% tariffs in steel and aluminum imports, as well as reciprocal tariffs to those nations where he saw unfair commercial practices. The largest victim of Trump’s decision to impose 25% tariffs on metals is expected , Vietnam and South Korea, main exporters to the US.
The impact of reciprocal tariffs is expected to be lethal for the Eurozone, which charges 10% tariffs on US car imports and pays 2.5% of import rights for national cars that supplies it. Such scenario will be unfavorable for the euro (EUR), which is already vulnerable due to the growing risks of economic contraction and inflation below the 2% objective of the European Central Bank (ECB).
Last week, Macquarie analysts warned that a US tariff bomb would probably find “fertile land in the EU”, quickly climbing the problems not solved in commercial tensions, since “Europe is full of objectives.”
The ECB is about to continue reducing interest rates, and some policy managers have also warned that the Central Bank may need to go below the neutral rate since the eurozone economy is not strong enough to support a 2%inflation.
ECB economists have predicted that the so -called Bank’s neutral rate will probably be between 1.75% and 2.25%.
In Monday’s session, investors will focus on the speech of the BCE president, Christine Lagarde, on the European Parliament at 14:00 GMT. Lagarde will participate in the plenary debate on the annual BC 2023 report.
What moves the market today: the EUR/USD faces pressure while increasing the attractiveness of the Usd safe refuge
- In addition to the discouraging market feeling, the performance of the US dollar (USD) is also driven by the growing expectations that the Federal Reserve (FED) will maintain interest rates in the current range of 4.25% -4.50% throughout the year.
- Macquarie’s strategists said, “our updated vision is that there will be no changes in the federal funds rate for 2025, with a probability that it remains in the range of 4.25 to 4.5%. We had previously suggested that there would be only an additional cut of 25 Basic points in March or May. ” Analysts have reviewed their expectations for the perspective of the FED monetary policy after the publication of the optimist Non -Agricultural Payroll (NFP) report (NFP) for January.
- The US NFP report showed that the economy added 143,000 jobs in January, less than 307,000 in December, which were reviewed upwards from 256,000. Macquarie analysts argued that the upward revisions of recent payrols point to an “acceleration of the even more pronounced trend.”
- Meanwhile, the unemployment rate decreased to 4% from estimates and the previous publication of 4.1%. The average earnings per hour surprisingly accelerated to 4.1% per year and increased at a robust rate of 0.5% monthly.
- This week, the main trigger for the US dollar will be the data of the January Consumer Price Index (CPI), which will be published on Wednesday. Investors will also pay close attention to the testimony of the president of the FED, Jerome Powell, before Congress on Tuesday and Wednesday.
Technical analysis: EUR/USD fights around 1,0300
The EUR/USD is maintained under pressure around 1,0300 in the European negotiation hours on Monday. The main currency pair fell after facing pressure near the exponential (EMA) mobile average of 50 days around 1,0436 last week, which suggests that the general trend is still bassist.
The 14-day relative force (RSI) index oscillates in the range of 40.00-60.00, indicating a short-term lateral trend.
Looking down, the minimum of January 13 in 1,0177 and the round level support in 1,0100 will act as important support areas for the torque. On the contrary, the psychological resistance of 1,0500 will be the key barrier to 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/AUD (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.
