- The EUR/USD sinks at 1,1484 while safe refuge flows favor the US dollar.
- Trump demands the “unconditional surrender” of Iran, the DXY jumps to a maximum of four days about 98.80.
- The solid data from the German ZEW are overshadowed by the risks of the Fed and the climbing in the Middle East.
The EUR/USD torque is collapsing more than 0.60% while the US dollar (USD) remains firm due to its safe refuge status amid the climbing of the conflict in the Middle East between Israel and Iran, which seems to be expanding as the White House considers its participation. At the time of writing, the pair is quoted at 1,1484, having fallen from maximum daily 1,1579.
The feeling became negative when US President Trump published in his social network a demand for “unconditional surrender” of Iran, promoting the dollar, which is reaching a four -day peak, as revealed by the US dollar index (DXY). The DXY, which tracks the performance of the US dollar compared to six other currencies, shows a gain of more than 0.67% in 98.79.
CNN reported that Trump’s decision to seek a diplomatic exit from the conflict in the Middle East is decreasing, citing officials familiar with the matter. They added that Trump is evaluating the use of US military assets to attack Iran’s nuclear facilities.
Apart from the geopolitics, the US economic data revealed that retail sales in the US fell for the second consecutive month. At the same time, industrial production, announced by the Federal Reserve (FED), also contracted. On the other side of the Atlantic, in the Eurozone, the data from the German ZEW exceeded the forecasts, while two officials of the European Central Bank (ECB) had become slightly neutral, adopting a waiting mode.
Given the current context, it is likely that the EUR/USD resume its ongoing upward trend. However, the FED monetary policy meeting on Wednesday, the publication of its latest summary of Economic Projections (SEP) and the press conference of President Jerome Powell can dictate the direction of the PAR.
What moves the market today: the Eur/usd collapses as the feeling worsens
- The EUR/USD extended its losses, ignoring the contraction of retail sales in the US in May, mainly due to a fall in car purchases. Sales in May decreased an intermensual 0.9%, below the predicted fall of 0.7%. In annual terms, sales increased 3.3%, decreasing from an increase of 5% registered in April.
- The US industrial production decreased an intermencing 0.2%, failing in estimates of a 0.1% increase. This marks the second contraction in the last three months, indicating weakness in the manufacturing sector.
- On Tuesday and Wednesday, the Fed celebrates its last monetary policy meeting. The operators have incorporated the expectation that the rates will remain unchanged, but are attentive to the update of the Summary of Economic Projections (SEP).
- Regarding an agreement with the Eurozone, US President Trump said the European Union (EU) is not yet offering fair treatment.
- The German ZEW data exceeded the forecasts, with both metrics improving. The ZEW pointed out that the recent growth in investment and consumer demand has contributed to the increase.
- Francois Villeroy of the ECB commented that monetary policy is in a good position, despite the fact that tensions in the Middle East have increased. He supports the idea of ​​the president of the ECB, Lagarde, of a global role for the euro. The Stournaras of the ECB declared that the ECB had reached a “first point of equilibrium” and that future feat cuts would depend on the data, according to the Greek press.
- It should be noted that the last increase in oil prices, caused by the conflict in the Middle East, could trigger an inflationary spiral, raising prices and taking central banks to become slightly more aggressive.
- Financial market participants do not expect the ECB to reduce their deposit rate at 25 basic points (PBS) at the July monetary policy meeting.
Euro technical perspective: Alcistas take a break while the EUR/USD falls below 1,1500
The EUR/USD’s upward trajectory is intended to continue despite the ongoing setback that drags cash prices below 1.15. Buyers are taking a respite, as indicated by the relative force index (RSI), suggesting that the bullish impulse is fading.
This could pave the way for an EUR/USD setback to 1,1450 or less, challenging the simple mobile average (SMA) of 20 days in 1,1411. Once exceeded, the next level is 1,1400.
On the contrary, if the EUR/USD Alcistas recover 1,1500, the immediate resistance appears in 1,1600, followed by June 16 in 1,1614 and the annual peak of 1,1631.
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.
