- EUR/USD can find support for improving the feeling of risk in the midst of a possible discussion about a ceasefire between Trump and Putin this week.
- The US dollar remains stable while operators exercise caution before the next publication of retail sales data.
- The euro was strengthened after Germany agreed to a debt restructuring and a significant increase in state spending.
The EUR/USD remains stable around 1,0880 during the Asian negotiation hours, with the US dollar (USD) remaining firm before the publication of retail sales data on Monday. However, the dollar faced winds against after the University of Michigan (UOM) reported a fall in its preliminary index of consumer feeling for March on Friday, falling to 57.9 – the lowest since November 2022 – from the previous reading of 64.7. This figure was also below the consensus estimate of 63.1.
The markets widely anticipate that the Federal Reserve (FED) will maintain its current policy position when you conclude its two -day meeting on Wednesday. According to the CME Fedwatch tool, operators have discounted almost 75% probability of a quarter quarter rate for June.
The EUR/USD torque could gain support for the improvement of the feeling of risk amid reports about a possible discussion of ceasefire between US President Donald Trump and Russian President Vladimir Putin this week. Trump’s envoy, Steve Witkoff, declared Sunday that he expects the two leaders to speak, adding that Putin “accepts the philosophy” of Trump’s cessation of fire and peace, according to The Guardian. Last week, the US and Ukraine proposed a cease cessation of 30 days to Russia, with Putin expressing their support for the initiative.
The euro (EUR) was strengthened after the news that Germany had reached an agreement on a debt restructuring and a substantial increase in state spending. Friedrich Merz, the incoming chancellor, said an agreement with the Green and Social Democratic parties on Friday, before a crucial parliamentary vote on Tuesday to reform the indebtedness rules. If the proposal obtains a two -thirds majority, the spending increase plan could provide a significant impulse to the EUR/USD.
Meanwhile, the vice president of the European Central Bank (ECB), Luis de Guindos, expressed concerns on Sunday, stating that President Trump’s policies are generating greater economic uncertainty than during the Covid-19 crisis, according to Bloomberg. Guindos said that the new US administration seems less inclined towards multilateralism, which encourages cooperation between jurisdictions to address global challenges – a change that described as an important source of instability.
In addition, the Governing Council member of the ECB and governor of the Bank of France, François Villery de Galhau, emphasized the need for the euro to play a more prominent role in the global stage. In an interview with the Dimanche Tribune during the weekend, Galhau requested the creation of a “powerful savings and investment union” to attract international investors to the euro.
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.
