- The EUR/USD weakens around 1,1380 in the early Asian session on Friday.
- Trump said the US was negotiating with China on trade after Beijing’s denial.
- The operators have become increasingly confident that the ECB will cut interest rates at the June meeting.
The EUR/USD torque weakens about 1,1380 during the early Asian session on Friday. However, the fall of the main torque could be limited since investors are still concerned about commercial tensions between the US and China. Later on Friday, the final reading of Michigan’s consumer’s feeling will be published.
The president of the USA, Donald Trump, said Thursday night that his administration was talking to China about commerce. Meanwhile, China said that negotiations on the economy and commerce had not been carried out, and urged the US to raise all unilateral tariff measures if it really wanted to solve the problem. Persistent concerns about possible Trump tariff threats and continuous commercial tensions probably weigh on the dollar and act as a tail wind for the EUR/USD in the short term.
“It seems that there is an abyss as wide as the Pacific Ocean between how US and China see trade,” said Matt Weller, head of market research at Stonex. “And I think that while that abyss remain, the rebounds in the dollar could be ephemeral.”
On the other side of the ocean, the operators increase their bets that the European Central Bank (ECB) will cut the interest rates in the June policy meeting due to the moderate comments of those responsible for the ECB. This, in turn, weakens the shared currency in front of the USD.
The BCE policy and governor of the Finnish Central Bank, Olli Rehn, said Thursday that the Central Bank should not rule out a “larger interest rates cut.” Meanwhile, the Governing Council member of the ECB, Madis Muller, said Wednesday that the Central Bank could have to reduce interest rates to levels that stimulate the economy if commercial uncertainty is more harmful to growth.
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.
