- The EUR/USD is strengthened as HCob PMI data is expected to show general growth in business activity in May.
- The US S&P PMI data may show that general business activity is expected to expand at a constant pace.
- The Rules Committee of the US House of Representatives approved the broad draft tax cuts of President Trump.
The EUR/USD is around 1,1340, near two weeks during Asian negotiation hours. The euro (EUR) continues its winning streak for the fourth consecutive session before the HCOB Purchase Managers Index (PMI) for the Eurozone, scheduled to be published later in the day. According to preliminary estimates, general business activity is expected to have grown in May at a faster rate than seen in April.
The US dollar (USD) continues to weaken due to the feeling of the depressed market in the United States (USA). Investors will probably observe the data of the purchasing managers index (PMI) of the US S&P global that will be published on Thursday. It is expected that general business activity will expand at a constant pace in May.
Moody’s reduced the US credit rating of AAA1, after similar sales by Fitch Ratings in 2023 and Standard & Poor’s in 2011. Moody’s also predicted that the federal debt of the United States is expected to reach around 134% of GDP by 2035, compared to 98% in 2023, with the budget deficit that is expected It is extended to almost 9% of GDP. This deterioration is attributed to the increase in debt service costs, the expansion of rights programs and the fall in tax revenues.
The Chamber Rules Committee approved the broad draft tax cuts by President Donald Trump. The US Chamber Rules Committee declared that a complete vote in the Plenary Session on the Trump Tax Cuts bill is scheduled to be carried out in the next few hours. The holders failed to move the index of the US dollar (DXY), which tracks the US dollar in front of a basket of six main currencies, which is quoted down around 99.50 at the time of writing.
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.
