- EUR/USD remains firm above the SMA of 1,1704, reaching a daily maximum of 1,1747.
- USA delays commercial progress with the EU; The agreement with the Philippines offers a limited support to the dollar.
- The ECB is expected to keep the rates on July 24 as inflation approaches the objective and the commercial risks persist.
EUR/USD remains above the simple mobile average (SMA) of 1,1704, quoting with profits of more than 0.50% due to an improvement in the appetite for the risk weighing on the US dollar, despite the fears that the European Union (EU) and the United States (USA) may not reach an agreement before the deadline of August 1. The pair is quoted at 1,1747 after reaching a daily minimum of 1,1678.
The narrative of the financial markets has remained unchanged for more than 24 hours. US actions ended the session in a mixed manner. The US commercial news continued to monopolize the headlines, with the US announcing an agreement with the Philippines, but has not revealed an advance with the EU.
The US Treasury Secretary, Scott Besent, said the White House is more concerned about the quality of the agreements than for its schedule. When asked about the extension of the deadline, he said it would depend on Donald Trump decide.
Meanwhile, EU leaders will meet with their Japanese and Chinese counterparts this week, according to Bloomberg. The topics to be discussed will focus on cooperation in defense and trade with Japan, with limited hope for discussions in Beijing.
The operators are attentive to the monetary policy decision of the European Central Bank (ECB) on July 24, in which the Central Bank is expected to maintain the rates without changes, since inflation is close to the objective and commercial risks are still evolving.
This week, the EU economic agenda will include consumer confidence, Julio’s preliminary PMIs and the ECB monetary policy decision. On the other side of the ocean, the US calendar will announce housing data, the preliminary PMIs of Global S&P, the initial applications of unemployment subsidy and the requests for lasting goods.
What moves the market today: EUR/USD rises by general weakness of the USD
- The US dollar index (DXY), which tracks the value of the dollar against a basket of six currencies, falls 0.46% to 97.39, promoting the progress of the euro compared to the previous one.
- The US economic data of last week presented a mixed image. While the consumer’s feeling improved, inflation accelerated in June, with the consumer price index (CPI) approaching 3%. The production price index (IPP) showed some signs of relief, but a solid retail sales report highlighted the continuous resilience of US consumers, despite the continuous increase in prices.
- Some EU diplomats said the block is exploring a set of reprisal measures against the US if an agreement does not materialize. These measures include digital services, aerospace products and bourbon. This would not compensate for the impact of the 30% tariff rate threatened by US President Donald Trump.
- The chances of the ECB keeping the rates without changes in the July 24 meeting are 57.5%, with a modest possibility of a cut of 0.25 percentage points of 42.5%. Compared to a day ago, the chances of a cut increased from 37.5%, which is worth mentioning.
Technical perspective: EUR/USD prepared to test 1,1800 in the short term
The upward trend resumed after registering two consecutive days of profits, exceeding the simple mobile average (SMA) of 20 days in 1,1709. The momentum favors buyers, as indicated by the Relative Force Index (RSI), which has jumped around its neutral level towards the 60th mark.
If the EUR/USD rises above 1,1750, a test of the 1,1800 figure is expected before the maximum of the year to date (YTD) of 1,1829. Otherwise, if the torque falls below 1,1700, a greater decrease is expected. The first support level would be 1,1600, followed by the 50 -day SMA in 1,1532, before 1,1500.
EURO – FREQUENT QUESTIONS
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.
