- EUR/USD clings to profits about 1,1370 while the US dollar is contained in a contained manner before the Fed monetary policy decision.
- Investors will focus on the guidance of the Fed on monetary policy perspectives.
- The conservative leader Merz was sworn as a German chancellor in his second attempt.
EUR/USD clings to the profits of the previous day around 1,1370 during the European negotiation hours on Wednesday. The main currency pair firmly quotes while the US dollar (USD) goes back before the decision on interest rates of the Federal Reserve (Fed) at 18:00 GMT. The US dollar index (DXY), which tracks the value of the dollar against six main currencies, operates cautiously within Tuesday’s range around 99.40.
According to the CME Fedwatch tool, operators have completely incorporated that the Fed will maintain stable interest rates in the current range of 4.25%-4.50%. Investors will pay special attention to the Monetary Policy Declaration and the Press Conference of the President of the FED, Jerome Powell, to obtain new clues about how long the Central Bank will maintain a restrictive monetary policy position.
Fed officials have indicated that monetary policy adjustments are not appropriate until they see cracks in the labor market and economic growth, since consumer inflation expectations have been disagree due to the repercussions of the new economic policies of the president of the United States (USA), Donald Trump.
Non -Agricultural Payroll (NFP) data showed constant employment growth, a limiting factor for Fed in the reduction of interest rates. Meanwhile, the US economy contracted 0.3% in the first quarter of the year, but the reason was the significant increase in anticipated imports by US business owners to avoid the impact of higher tariffs.
Contrary to the guidance of the Fed, President Trump has repeatedly urged to the Central Bank, especially Jerome Powell, to reduce interest rates. Trump also threatened to dismiss Powell from his functions for not reducing financing costs despite the decrease in energy prices, food, etc.
Apart from the Fed policy, commercial conversations between the US and China in Geneva are an important trigger for the US dollar. The US Treasury Secretary, Scott Besent, and the trade representative, Jamieson Greer, confirmed Tuesday night that they will meet with their Chinese counterparts for commercial discussions. Investors see this as a constructive step towards the descale in the commercial war between the US and China, which has supported the futures of the S&P 500.
Daily summary of market movements: EUR/USD firmly quotes while Merz is sworn as German Chancellor
- EUR/USD demonstrates strength while the euro (EUR) is firmly quoted after the conservative leader Friedrich Merz was sworn as German chancellor in his second attempt. Merz failed to ensure an absolute majority in the first attempt despite the fact that the CDU/CSU and the Social Democrats had collectively a 326 voting bank. Merz received 310 votes in the first attempt, six less than the 316 required to be elected German Chancellor.
- Friedrich Merz’s confirmation as Chancellor has decreased fears of political instability and is expected to drive the expenditure measures approved in March. This scenario would strengthen the German economy and favor the euro and German assets.
- However, the uprising potential of the euro seems to be limited since the European Central Bank (ECB) is prepared to continue flexible monetary policy at the June meeting. The ECB is almost certain that it will cut its key interest rates again next month, since officials are more focused on absorbing economic shocks against tariffs announced by President Trump than in the inflation of the euro zone, which is expected to return to the objective of the central bank of 2% this year.
- In the global front, the Commission of the European Union (EU) is actively considering measures to compensate for the impact of the highest tariffs by the USA on Tuesday, the EU Commerce of Commerce, Maros Sefcovic, declared that the continent is exploring countermeasures while Trump has delayed reciprocal tariffs for 90 days. However, SEFCOVIC clarified that the EU’s main priority is the commercial resolution with the USA. A Bloomberg report showed on Tuesday that the EU plans to impose additional tariffs on US goods worth approximately 100 billion euros if commercial conversations do not achieve a satisfactory result for the block.
Technical analysis: EUR/USD maintains the 20 -day EMA key
EUR/USD firmly quotes about 1,1370 on Wednesday, while the 20 -day exponential mobile average (EMA) around 1,1270 continues to act as an important support for the torque.
The 14-day relative force (RSI) index falls within the range of 40.00-60.00, indicating that the bullish impulse has concluded for now. However, the upward trend still prevails.
Looking up, the psychological level of 1,1500 will be the main resistance for the torque. On the contrary, the maximum of September 25, 1,1214 will be a key support for the euros of the euro.
LIBRA ESTERLINA FAQS
The sterling pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most commercialized currency exchange unit (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion a day, according to data from 2022. Its key commercial peers are GBP/USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The sterling pound is issued by the Bank of England (BOE).
The most important factor that influences the value of sterling pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions itself has achieved its main objective of “price stability”: a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, which makes access to credit for people and companies more expensive. This is generally positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing down. In this scenario, the Bank of England will consider lowering interest rates to reduce credit, so that companies will borrow more to invest in projects that generate growth.
Published data measure the health of the economy and can affect the value of sterling pound. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of the sterling pound.
Another important fact that is published and affects the pound sterling 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 benefit exclusively from 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.
