- EUR/USD rises 0.68% while ISM data show that US manufacturing is still contraction.
- Trump’s renewed tariff threats on China and metals away from US dollar investors.
- The EU SEFCOVIC will meet with the USTR GERER in Paris in the midst of growing transatlantic commercial tensions.
The EUR/USD rises during the North American session to reach a maximum of six weeks of 1,1449, prepared to stay above 1,1400 while the US dollar falls to levels not seen since April, since the trade of “selling America” ​​continues. The growing commercial tensions between the United States (USA) and China, as well as the Eurozone (EU), led investors to favor the dollar, with the euro registering profits of more than 0.68%.
Recently, economic data in the US revealed that commercial activities in the manufacturing sector remained in contraction territory, according to the Institute for Supply Management (ISM).
Last week, US President Donald Trump revealed that China had violated his agreement with Switzerland. Consequently, it threatens to impose 50% tariffs on aluminum and steel imports, effective as of June 4, which caused a flight to shelter, except the US dollar.
Beijing responded to Washington’s accusations as “unfounded” and threatened to respond with forceful measures.
In other commercial news, the EU trade commissioner, Sefcovic, will meet with the USTR GERER in Paris on Wednesday, according to a spokesman.
The EU economic calendar included the publication of the purchasing managers index (PMI) of HCob manufacturing for May, with most readings being mixed, with only Spain showing signs of expansion.
Daily market movements EUR/USD: Euro extends its rally beyond 1,1400, look at 1,1450
- The ISM manufacturing PMI dropped to 48.5 in May from 48.7, marking the lowest reading since November. The price index remained expanding at 69.4%, while the employment index continued in contraction, slightly improving 46.5 to 46.8.
- The Global S&P manufacturing PME remained expanding but fell to 52.0 from 52.3 in April.
- The governor of the Fed, Christopher Waller, has adopted a more moderate position. He affirmed that feat cuts are still possible later this year, but warned that policy managers are mainly focused on controlling inflation.
- May’s manufacturing PMI of the eurozone remained in recession territory, going down to 49.4, although it is the fifth consecutive monthly gain and the highest in almost three years. The manufacturing PMI of Germany was reviewed down 48.3 from 48.8, underlining the continuous weakness in the largest economy in the region.
- Eur/USD operators will have to digest a very busy economic calendar in the next week. In the EU, the agenda will include inflation figures, the monetary policy of the European Central Bank (ECB) and the press conference of the president of the ECB, Christine Lagarde. In the US, investors are attentive to the publication of non -agricultural payroll figures, the ISM services PMI and the speakers of the Federal Reserve (Fed).
- The participants of the financial market had already completely discounted the expectation that the ECB would reduce their deposition facility by 25 basic points (PBS) to 2% in the next monetary policy meeting.
EURO TECHNICAL PERSPECTIVE: EUR/USD exceeds key levels of resistance, buyers point to 1,1500
The EUR/USD bullish trend remains intact, as indicated by the daily graph; However, the trend seems to be overextended unless buyers recover higher prices. The relative force index (RSI) is bullish, indicating that buyers are in control. However, the imminent monetary policy decision of the ECB, with expectations of a rate cut, could pave the way for a setback.
If the EUR/USD rises above 1,1450, this could open the door to challenge the peak of the year to date (YTD) reached on April 21 in 1,1573. On the other hand, if the shared currency weakens and falls below 1,1400, the first support would be 1,1350. A rupture of this level will expose 1.13 and the simple mobile average (SMA) of 20 days in 1,1277.
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.
