- The Euro stopped the dollar’s bullish run.
- Euro supply broke a six-day winning streak despite the general pullback towards the USD.
- Rate cut expectations dominate the landscape as markets head into a new week.
EUR/USD held on to the lows of 1.1000 on Monday, failing to make a significant pullback after falling below the key psychological level last week, but also failing to fall further despite a slight drop in European retail sales figures. . Everything is focused on rate cut hopes in the coming days, and upbeat US jobs data has taken widespread rate cut hopes to a minimum.
European economic data remains tepid for most of the trading week, leaving Euro traders waiting until the minutes of the latest Federal Open Market Committee (FOMC) meeting are released on Wednesday afternoon. , which is sure to attract a lot of attention but is unlikely to reveal anything new. This week’s key data on the US economic calendar will be the latest print of the consumer price index (CPI) on Thursday.
According to the CME’s FedWatch tool, rate traders now expect a roughly 80% chance of a single 25 basis point rate cut by the Fed in November. Last week’s nonfarm payrolls (NFP) eliminated almost all hopes of a double rate cut in November, to the point that rate traders see a one in five chance of no rate cut at all on November 7, according to the CME’s FedWatch tool.
EUR/USD Price Forecast
Euro traders found the buy button enough to break a six-day losing streak, but not enough to take the intraday price action above the key 1.1000 zone. EUR/USD has fallen into a consolidation range below the 50-day EMA near 1.1040, but still above the 200-day EMA at 1.0900. Momentum still favors the bulls, but there is little to prevent widespread risk aversion flows into the Dollar.
EUR/USD Daily Chart
The Euro FAQs
The Euro is the currency of the 20 countries of the European Union that belong to the euro zone. It is the second most traded currency in the world, behind the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of more than $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2% ).
The European Central Bank (ECB), headquartered in Frankfurt, Germany, is the reserve bank of the euro zone. The ECB sets interest rates and manages monetary policy The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – tend to benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), are an important econometric data for the euro. If inflation rises more than expected, especially if it exceeds the 2% target set by the ECB, it is forced to raise interest rates to bring it back under control. Relatively high interest rates compared to their peers tend to benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment, but it may encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. The economic data for the four largest economies in the eurozone (Germany, France, Italy and Spain) are especially significant, as they represent 75% of the eurozone economy.
Another important release for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers wishing to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for 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.
