- The EUR/USD quotes about 1,0310 in the Asian session on Monday.
- The uncertainty and the threat of commercial war explore widely to the US dollar.
- The ECB DOVISH posture and the signal of several interest rate cuts weigh on the common currency.
The EUR/USD pair falls to around 1,0310 during the Asian session on Monday, pressured by strengthening the dollar. Later on Monday, the confidence of the Inverter Sentix of the Eurozone for February and the speech of the president of the ECB, Christine Lagarde, will be at the center of attention.
Trump said Friday that he plans to announce reciprocal tariffs to many countries for Tuesday or Wednesday, without specifying which. The measure increases fears on a global commercial war, supporting the refuge license as the US dollar (USD).
“The immediate concern, however, could not be inflation, since there could be opposite effects such as the deceleration of demand. The greatest concern is uncertainty and change towards a more protectionist world,” said Charu Chanana, head of the chief of chief of Saxo investments.
On the other side of the Atlantic, the growing speculation about more rates cuts by the European Central Bank (ECB) in the midst of weak economic growth will probably weigh on the euro (EUR) compared to the USD. The Governing Council member of the ECB, Boris Vujcic, said that the expectations of three more rates cuts this year are reasonable, although it will take until the beginning of the second quarter to know more certainly if they will materialize.
The operators will closely follow the developments around the tariff policies of the US president, Donald Trump, since he has repeatedly threatened against Europe. JPMorgan’s economist, Nora Szentivanyi, said “motivation, objectives, moment and tariff rates are all uncertain.” However, the European Commission said it would retal “firmly ‘against any tariff imposed by the USA.
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.
