- EUR/USD depreciates as the US dollar is strengthened, since US yields are weakened due to possible Japan cuts in government debt emission.
- The dollar gains ground before the publication of the minutes of the FOMC meeting of May 7 on Wednesday.
- Trump expressed his satisfaction since the EU is accelerating the process to achieve a commercial agreement with the United States.
EUR/USD continues its losses for the second consecutive day, quoting around 1,1310 during Wednesday’s Asian hours. The torque depreciates as the US dollar (USD) receives support and US yields depreciate after Japan’s indication on possible cuts in government debt issuance, which has promoted global bond markets. At the time of writing, the yields at 10 and 30 years of the US Treasury bonds are 4.46% and 4.97%, respectively.
In addition, the dollar received support since the Conference Board Conference Conference Index rose to 98.0 in May from the previous reading of 86.0. Meanwhile, orders for lasting goods from the United States fell by 6.3% in April compared to an increase of the previous 7.6%. This figure was better than the estimated 7.9%decrease. The operators probably expect the FOMC minutes, which will be published later on Wednesday.
The president of the Bank of the Federal Reserve of New York, John Williams, emphasized the importance of inflation expectations being well anchored. Williams wants to prevent inflation from becoming highly persistent because that could become permanent when responding relatively strong when inflation begins to deviate from the target. On Tuesday, the president of the Fed of Minneapolis, Neel Kashkari, said that policy managers should avoid any adjustment in interest rates until clear estimates of the impact on inflation due to the highest tariffs.
However, the euro (EUR), risk sensitive, gained support as commercial tensions softened between the United States (USA) and the European Union (EU). On Sunday, the president of the United States, Donald Trump, extended the deadline of tariffs on EU imports from June 1 to July 9. On Monday, Brussels agreed to accelerate commercial conversations with the United States to avoid a transatlantic commercial war.
On Tuesday, US President Donald Trump expressed his satisfaction in a publication in Truth Social, noting that the EU is accelerating the process towards a commercial agreement with the United States. Trump wrote: “I was extremely satisfied with the 50% allocation of tariffs to the European Union, especially because they were slowly walking. ‘I just were informed that the EU has called to quickly establish meeting dates. This is a positive event, and I hope they do it.
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.
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