- The euro falls as the agreement between the US and the EU triggers a wide strength of the dollar, reflecting the 15% tariff framework in the Japanese style.
- The ECB is still divided; The euro zone data agenda includes growth, employment and inflation figures.
- The markets focus on the FED decision, the Powell guide and the underlying PCE inflation indicator this week.
The EUR/USD fell more than 1% on Monday, since investors bought the dollar after the news that the United States (USA) and the European Union (EU) had reached a commercial agreement, similar to that signed by Japan. The pair quotes 1,1590 after reaching a maximum of 1,1771.
Wall Street closed Monday’s session with profits, since investors seemed confident that the US would reach additional agreements throughout the week. However, the deadline of August 1 is approaching, and Washington still cannot reach agreements so far with two of its three largest partners: Canada and Mexico.
Apart from this, the US economic agenda will be full this week. The Federal Open Market Committee (FOMC) is expected to maintain interest rates without changes in its meeting from July 29 to 30. The looks will be placed in the president of the FED, Jerome Powell, while market participants look for clues about when the Central Bank will resume their relaxation cycle.
In addition, more US economic data is expected the publication of the inflation indicator preferred by the FED, the underlying PCE price index for June, together with employment and growth data, and the ISM manufacturing PMI, is expected to provide information about the current state of the economy.
On the other side of the Atlantic, the European Central Bank (ECB) kept the fees and adopted a meeting approach by meeting in the middle of a division between pigeons and hawks in the Governing Council.
The EU economic agenda will include retail sales data for Germany, growth figures for Spain, Italy, Germany and the EU. In addition, the operators expect the publication of the HCOB manufacturing PMIS for Spain, Italy, Germany and the block, employment data and inflation figures in Germany and the EU.
What moves the market today: the EUR/USD is submerged before the Fed decision, occupied agenda
- During the weekend, US President Donald Trump announced that the US and the EU have reached an agreement that will impose 0% tariffs to certain American products imported to the EU. Meanwhile, the EU assets would pay a 15% tariff, which is less than 30% established by Washington two weeks ago. Beyond tariffs, the agreement would include the commitment of 750,000 million dollars in American energy.
- The US economic data last week, especially in the work front, supported the Federal Reserve decision to keep the federal fund rate unchanged. Policies responsible are still cautious, since inflation indicators have not yet resumed a clear path towards the 2% target of the Central Bank.
- In addition to the FED decision, the operators will be attentive to the publication of the Employment and Labor Rotation (Jolts) survey, which is expected to show that the offers decreased from 7,769 million to 7.55 million. In addition, it is projected that the Gross Domestic Product (GDP) of the second quarter improves from -0.5% to 2.4% in intertrmetral terms. It is expected that the Personal Consumer Expenses Index (PCE) underlying the Fed will be maintained unchanged by 2.7% year -on -year.
- In the EU, the agenda will include the GDP of Spain, which is expected at 0.6% intertrimestral, without changes with respect to the first quarter of 2025. It is projected that retail sales in Germany improve a fall of -1.6% to a growth of 0.5%.
- President Trump said that US will impose a tariff on the rest of the world, and that is what they will have to pay, while he would love to see China open their country. In addition, Trump said the world tariff would be between 15% and 20%.
Technical perspective: EUR/USD resumes the bassist trend, falls below 1,1700 and 1,1600
The EUR/USD collapsed below the simple mobile average (SMA) of 20 days in 1,1693 and also below the 1,1600 figure, after the EU and US commercial news the relative force index (RSI) became bassist, indicating that the operators are taking profits in the pair and/or changing slightly to a uprising posture over the dollar.
If the EUR/USD falls below the 50 -day SMA of 1,1569, the operators would expect a 1,1500 test. Once surpassed, the next stop would be the 1,1400 mark. On the other hand, if the torque rises above 1,1600, the 20 -day SMA would be available in 1,1693.
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.
