- EUR/USD remains subdued while the US dollar advances after the decision of a federal court that arrested Trump’s “release day”.
- It is expected that the Gross Domestic Product (GDP) annualized USA again 0.3% in the first quarter.
- Klaas Knot of the ECB pointed out that the current inflation perspective in Europe challenges the central bank to make direct movements.
The EUR/USD extends its loss streak per third consecutive session, quoting around 1,1240 during the Asian hours of Thursday. The annualized GDP of the first trimester of the US will be published later in the day, the prices of personal consumption expenses (PCE) compared to the previous quarter and initial unemployment applications.
The EUR/USD torque depreciates as the US dollar (USD) gains ground after the decision of a Federal Court of the United States on Wednesday to block President Donald Trump to impose tariffs on the “day of liberation”. A panel of three judges in the International Trade Court in Manhattan ruled that Trump lacked the authority and declared that the measure was unconstitutional and was beyond the presidential authority.
On Wednesday, the minutes of the Federal Open Market Committee (FOMC) for the last policy indicated that Federal Reserve officials (FED) agreed that the growing economic uncertainty justified their patient approach to interest rate settings. Fed officials emphasized the need to maintain interest rates without changes for some time, since recent changes in the US economic perspective.
However, the downward risk of the Risk sensitive (EUR) could be contained due to the decrease in commercial tensions between the United States and the European Union (EU). Last week, President Trump extended the deadline of tariffs on EU imports from June 1 to July 9.
Brussels agreed on Monday to accelerate commercial conversations with the United States to avoid a transatlantic commercial war. On Tuesday, Trump expressed his satisfaction in a publication in Truth Social, noting that the EU is accelerating the process to achieve a commercial agreement with the USA. “They just reported that the EU has called to quickly establish meeting dates. This is a positive event, and I hope they do it,” Trump wrote.
On Wednesday, Klaas Knot, a member of the Governing Council of the European Central Bank (ECB) and president of the Dutch Central Bank of Nederlandsche Bank (DNB), said that the current inflation perspective in Europe is gloomy, challenging the Central Bank to make direct movements. Knot added that the medium -term inflation perspective is more ambiguous, which could cause considerable problems.
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.
