- The EUR/USD is quoted on negative terrain around 1,0880 during Thursday’s Asian session.
- The growing commercial war between the US and the EU Socava the shared currency.
- Investors will be attentive to the February IPP of the USA.
The Eur/USD loses land to around 1,0880 during the Asian negotiation hours of Thursday. The climbing of the commercial tension between the United States and the European Union (EU) exerts some sales pressure on the euro (EUR) against the dollar. The operators will take more clues of the FEBRUARY PRODUCTION PRICE INDEX (IPP) from the United States and the weekly data of initial unemployment subsidy applications, which will be published later on Wednesday.
The president of the USA, Donald Trump, said that the US would respond to EU’s countermeasures against their new 25% tariffs on steel and aluminum, increasing the risk of greater escalation in its global commercial war. The European Commission announced retaliation tariffs on Wednesday, saying that its tariffs would be applied to US goods for a value of up to 26 billion euros (28.4 billion dollars) and would cover a wide variety of items, including ships, boourbon and motorcycles. This measure would come into force on April 1, and a second set of countermeasures in mid -April is expected.
However, the falls for the main torque could be limited amid the fear that Trump’s protectionism pushes the US economy towards a recession, which would weigh on the USD.
“We were also going to receive an inflation update, which we received, and inflation is still quite persistent and turned out to be lower than expected. I think it was a bit of relief for the market, so the feeling improved. But the feeling is on a very short rope and can change so quickly depending on the risks of the headlines,” said Amarjit Sahota, executive director of Klarity Fx in San Francisco.
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.
