- The EUR/USD could be appreciated as the US dollar fights due to the growing expectations that the Fed cuts interest rates.
- The change of ADP employment in the US fell by 33,000 in June, compared to the gain reviewed down 29,000 in May.
- The BCE policy head, Pierre Wunsch, said: “I don’t feel uncomfortable with market expectations about interest rates.”
The EUR/USD remains under pressure per second consecutive session, quoting around 1,1800 during the Asian hours of Thursday. The torque could recover land as the US dollar (USD) loses strength amid the growing expectations that the Federal Reserve (Fed) will cut interest rates, driven by the disappointing National Employment Report ADP.
The change of ADP employment in the US fell for the first time in more than two years in June. Private sector payrolls decreased by 33,000 in June after a gain reviewed down 29,000 in May. This figure was below the market consensus of 95,000.
Operators are aware of labor market data, including non -agricultural payroll (NFP) of the US and the average profit per hour, which will be published later in the day. In addition, the ISM services PMI and the US global PMI of S&P will also be observed on Thursday.
The latest comments from several officials of the European Central Bank (ECB) in the ECB forum highlighted the growing concern about the strength of the euro (EUR) and its possible discouraging effect on inflation.
The BCE policy head, Pierre Wunsch, said Wednesday: “I don’t feel uncomfortable with market expectations about interest rates.” “There is an argument in favor of providing a slightly favorable policy stance,” Wunsch added. Meanwhile, the ECB member, Olli Rehn, said: “The ECB must be aware of the risk that inflation is persistently maintained below the 2%target.” Rehn said that “the European joint indebtedness to finance the defense could strengthen the role of the euro by creating a new safe asset.”
EURO – FREQUENT QUESTIONS
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.
