- The EUR/USD rises abruptly to about 1,0500 since the optimistic preliminary data of the Eurozone PMI for January have strengthened the euro.
- It is widely anticipated that the ECB will cut its deposit rate at 25 PBS to 2.75% on Thursday.
- Trump’s call to immediate rates cuts and his soft tone towards China have heavy strongly over the US dollar.
The EUR/USD rises near the 1,0500 psychological resistance in the European session on Friday, since the Bank Commercial Hamburg (HCOB) reported that the compound purchasing managers index (PMI) preliminary of the Eurozone grew in January after contracting In the last two months. The preliminary report of the HCOB PMI, compiled by S&P global, showed that the general business activity expanded. The compound PMI rose to 50.2 from 49.6 in November. Economists expected the PMI to continue decreasing but at a slower pace up to 49.7.
“The beginning of the new year is slightly encouraging. The private sector is back in cautious growth mode after two months of contraction. The drag of the manufacturing sector has decreased a bit, while the services sector continues to grow moderately. Germany played a Important role in improving the eurozone economy, with the compound index returning to expansive territory.
The report also showed a robust labor demand and new businesses in the services sector. Meanwhile, the manufacturing sector continues to experience dismissals and decrease in new orders.
The optimistic PMI of the Eurozone has improved the attractiveness of the euro (EUR) in the short term, but it is unlikely to solve its weak general perspective due to the firm moderate bets of the European Central Bank (ECB). The ECB is ready to cut its deposit rate at 25 basic points (PBS) to 2.75% on Thursday and continue to follow the process in the next three policy meetings, since officials are sure that inflationary pressures will return from Sustainable at the desired 2%rate.
Daily market summary: the EUR/USD shoots while the USD risk premium decreases
- The EUR/USD is strengthened since the US dollar risk premium (USD) has decreased significantly. The dollar index (DXY), which follows the value of the dollar compared to six main currencies, drops about 0.6% on Friday and marks a new minimum of five weeks about 107.45. The USD risk premium has decreased significantly since the president of the United States (USA), Donald Trump, has indicated that he could reach an agreement with China without using tariffs.
- The dollar has earned almost 10% since October, partly due to market expectations that President Trump would impose lethal tariffs on his business partners shortly after returning to the White House. During the electoral campaign, Trump commented that if he won, he would impose tariffs of 60% to China and 25% to other economies in North America.
- President Trump said in an interview with Fox News on Thursday that he had a friendly conversation with Chinese leader Xi Jinping and could reach an agreement on commercial practices. Trump added that he would prefer not to wear tariffs against China, but called tariffs a “tremendous power,” Reuters reported.
- In addition to Trump’s assumption to relax tariffs on China, their support for immediate cuts of interest rates in his comments in the World Economic Forum (Wef) in Davos on Thursday has also put the US dollar in retreat.
- In the future, the main trigger for the US dollar will be the monetary policy of the Federal Reserve (FED), which will be announced on Wednesday. It is almost certain that the Fed will maintain interest rates without changes in the range of 4.25%-4.50%. Investors will pay close attention to the Fed President’s conference, Jerome Powell, to determine if the officials agree with the opinions of President Trump.
- In Friday’s session, investors will focus on the preliminary data of the US Global S&P PMI for January, which will be published at 14:45 GMT.
Technical analysis: EUR/USD marks a new monthly maximum about 1,0500
EUR/USD marks a new monthly maximum about 1,0500 on Friday. The main pair of currencies is strengthened after breaking over the 50 -day exponential (EMA) mobile average, which is negotiated around 1,0456, Monday. The PAR has continued to attract offers since it fell to a minimum of more than two years of 1,0175 on January 13.
The torque has entered the path of a bullish reversal after a rupture of the maximum of January 6, 1,0430, which has confirmed a divergence in the price of the asset and the relative force index (RSI) of 14 days. On January 13, the RSI formed a higher minimum, while the pair made lower minimums.
Looking down, the minimum of January 20, 1,0266 will be the key support zone for the torque. On the contrary, the maximum of December 6, 1,0630 will be the key barrier to the euros of 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/AUD (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.