- EUR/USD falls on rising risk aversion ahead of ISM PMI release on Thursday.
- The US dollar recovers intraday losses as Treasury yields rebound from multi-month lows.
- The euro’s fall could be limited as the latest inflation data raised doubts about possible ECB rate cuts.
The EUR/USD depreciates to near 1.0790 during the European session on Thursday. This drop is attributed to the improvement of the US Dollar (USD) due to a recovery in the US Treasury yields ahead of key US economic data, including the ISM Manufacturing PMI and the weekly Initial Jobless Claims, both scheduled to be released later in the North American session.
However, the US dollar faced challenges due to dovish sentiment around the Federal Reserve’s (Fed) policy path. The Fed decided to keep rates unchanged in the 5.25%-5.50% range at its July meeting on Wednesday.
During a press conference following the interest rate decision, Federal Reserve Chairman Jerome Powell stated that a rate cut in September is “on the table,” while the Federal Open Market Committee (FOMC) declined to commit to anything in the statement. Powell added that the central bank will closely monitor the labor market and remain vigilant for signs of a possible sharp slowdown, according to Reuters.
Across the Atlantic, the HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) posted a reading of 45.8 for July, slightly above the expected and previous readings of 45.6, data showed on Thursday. Also on Wednesday, the Harmonized Index of Consumer Prices (HICP) in the Eurozone rose 2.6% year-on-year in July, compared with 2.5% in the previous month. This figure was above the estimate of 2.4%.
The latest Eurozone inflation report has raised doubts about possible interest rate cuts by the European Central Bank (ECB) in September. The Euro could attract some buyers due to the diminishing chances of the ECB cutting interest rates at its meeting on September 14.
Euro PRICE Today
The table below shows the exchange rate of the Euro (EUR) against the major currencies today. The Euro was the weakest currency against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.56% | -0.28% | 0.18% | 0.37% | 0.13% | -0.27% | |
| EUR | -0.38% | 0.18% | -0.65% | -0.21% | -0.00% | -0.25% | -0.65% | |
| GBP | -0.56% | -0.18% | -0.82% | -0.38% | -0.18% | -0.42% | -0.82% | |
| JPY | 0.28% | 0.65% | 0.82% | 0.43% | 0.63% | 0.33% | -0.05% | |
| CAD | -0.18% | 0.21% | 0.38% | -0.43% | 0.21% | -0.04% | -0.44% | |
| AUD | -0.37% | 0.00% | 0.18% | -0.63% | -0.21% | -0.24% | -0.63% | |
| NZD | -0.13% | 0.25% | 0.42% | -0.33% | 0.04% | 0.24% | -0.39% | |
| CHF | 0.27% | 0.65% | 0.82% | 0.05% | 0.44% | 0.63% | 0.39% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the chart will represent the EUR (base)/USD (quote).
Euro FAQs
The Euro is the currency of the 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world, behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB), based in Frankfurt, Germany, is the reserve bank of the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – generally benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the Eurozone and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, as measured by the Harmonised Index of Consumer Prices (HICP), is an important econometric data point for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, the ECB is forced to raise interest rates to bring inflation back under control. Relatively high interest rates compared to their peers usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. Economic data from the four largest Eurozone economies (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone economy.
Another important output for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for 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.
