- EUR/USD rises to around 1.0855 in the early Asian session on Thursday.
- Private sector employment increased by 233,000 jobs in October.
- Eurozone HICP and US PCE inflation data will be in the spotlight on Thursday.
The EUR/USD pair attracts some buyers near 1.0855 during the early Asian session on Thursday. The weakening US Dollar (USD) and the better-than-expected preliminary Eurozone Gross Domestic Product (GDP) for the third quarter provide some support to the major pair.
The US economy grew at an annualized rate of 2.8% in the third quarter (Q3), slightly lower than the 3% estimated by economists. Meanwhile, private sector employment rose by 233,000 jobs in October, compared to September’s reading of 159,000 (revised from 143,000), according to the October ADP National Employment Report.
The US Dollar Index (DXY), which measures the USD against six major rivals, retreats to weekly lows of 104.09 after hitting the highest level since July 30 at 104.63 on Tuesday. Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago, said markets expect a 25 basis point (bps) cut at the November meeting, but another cut in December remains a toss-up.
The Eurozone economy expanded by 0.4% quarter-on-quarter in the third quarter of 2024, according to preliminary Eurostat estimates, stronger than the 0.2% expected. In annual terms, Eurozone GDP grew 0.9% in the third quarter, above the market consensus of 0.8%.
Investors will be keeping an eye on the Eurozone Harmonized Index of Consumer Prices (HICP) and the US Personal Consumption Expenditure Price Index (PCE) data, due out later on Thursday.
The 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 traded currency in the world, behind the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of more than $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), headquartered in Frankfurt, Germany, is the reserve bank of the eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the increase or decrease in interest rates. Relatively high interest rates (or the expectation of higher rates) tend to benefit the euro and vice versa. The Governing Council of the ECB makes decisions on monetary policy at meetings held eight times a year. Decisions are made by the directors of the Eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), are an important econometric indicator for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, it forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to their counterparts tend to benefit the euro, making the region more attractive as a place for global investors to park their money.
The published data measures the health of the economy and may have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence 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 may 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. Economic data for the four largest eurozone economies (Germany, France, Italy and Spain) are especially significant, as they represent 75% of the eurozone economy.
Another important data that is published about 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 in-demand export products, its currency will gain value simply from the additional demand created by foreign buyers seeking to purchase 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.
