- Moody’s reduces the US debt rating, causing a massive sale of the US dollar and increasing the EUR/USD.
- The euro wins despite a light data flow while the Speeches of the ECB and the Fed guide the feeling.
- Traders observe PMIs and unemployment requests in search of new clues in the midst of fiscal uncertainty.
The EUR/USD extended its rally for the third consecutive day on Wednesday, since the US dollar (USD) continued to face winds against after the US credit reduction last Friday. This, together with the vote of “A great and beautiful bill” of Trump, is weighing on traders, since the national debt will increase, which has been considered unsustainable by the president of the Federal Reserve (Fed), Jerome Powell.
The single currency continues to capitalize on the general weakness of the US dollar. The downward review of Moody’s of the debt qualification of the US government of AAA to AA1 on Friday lit the fears of investors during the weekend, since the Trump administration budget will be subject to a vote at the US Congress.
The lack of economic data in the Eurozone (EU) and in the US keeps the traders with the speeches of the officials of the European Central Bank (ECB) and the Fed. In addition, the negotiations on commercial agreements of the US, the feeling of the market and the geopolitics have helped shape the path of the EUR/USD.
Recently, the ECB member, José Luis Escrivá, commented that the recent appreciation of the euro had been a surprise, adding that it would be more challenging to predict how tariffs impact inflation.
On Thursday, the Economic Calendar will have the Data on the Purchase Manager Index (PMI) of HCOB for May in the EU, Germany and France. On the other side of the Atlantic, the US economic agenda will include the data of initial unemployment applications and the Global S&P PMIs, which are expected to remain unchanged, according to estimates.
Daily movements of the EUR/USD market: driven by the massive sale of the USD while markets punish US policies.
- The leader of the majority at the US House of Representatives, Scalise, said the Chamber will vote on Trump’s fiscal bill on Wednesday night. Previously, US President Donald Trump expressed confidence in the progress of the bill in Congress.
- Trump confirmed that truce conversations between Russia and Ukraine would begin; He affirmed that the negotiations would be carried out in the city of the Vatican.
- A high fire between Russia and Ukraine will benefit both countries, relieving interruptions in the supply chain throughout Europe.
- The probabilities of interest rates indicate a 58% probability that the ECB will reduce rates at 25 basic points at the next June 5 meeting. Most ECB officials have expressed their support for a cut in the next meeting, followed by a pause.
- HCOB PMI data is expected to show a minimum improvement in the manufacturing PMI, but not in services and compound. Despite remaining in expansive territory, this highlights the ongoing global economic slowdown.
- The German Prime Minister, Merz, confirmed a meeting with the US president, Trump, and indicated a proposal to eliminate mutually. Merz expressed optimism that the US could be open to seek a commercial agreement with the EU, pointing out a possible thaw in transatlantic commercial tensions.
EUR/USD Technical Perspective: Alcistas ready to challenge 1,1400
The EUR/USD maintains an upward trend. The torque exceeded the simple mobile average (SMA) of 20 days in 1,1277 and is on the way to reach a maximum of two weeks of 1,1362, exceeding the 11300 mark.
The relative force index (RSI) shows that the momentum favors buyers.
Therefore, the next resistance of the EUR/USD would be 1,1400. A rupture of this level will present the peak of April 29 in 1,1421, followed by the maximum of April 11, 1,1473 and 1.15.
In the bearish front, sellers need to carry prices below 1,1300. This would pave the way to test the minimum daily of May 20, 1,1217, followed by 1.12 and the 50 -day SMA in 1,1130.
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.
