- The EUR/USD raises before the US CPI data for January, which will influence Fed monetary policy perspectives.
- The president of the European Commission, Ursula von der Leyen, has threatened to take countermeasures against the 25% tariff of the US president, Trump, on the imports of steel and aluminum.
- The ECB is expected to cut interest rates three more times this year.
EUR/USD rises to about 1,0380 in Wednesday’s European session before consumer price index (CPI) of the United States (USA) for January, which will be published at 13:30 GMT.
The US CPI report is expected to show that the annual inflation of the underlying CPI, which excludes volatile food and energy prices, grew at a slower pace of 3.1%, compared to an increase of 3.2% in December. In the same period, it is estimated that the general inflation of the CPI has remained stable in 2.9%. Monthly, it is expected that both the general and underlying CPI have increased 0.3%.
Inflation data is expected to influence market speculation on how long the Federal Reserve (FED) will maintain interest rates in the current range of 4.25-4.50%. The signs of a deceleration in inflationary pressures would increase moderate expectations around the Fed. Meanwhile, persistent inflation data would suggest that Fed should maintain higher interest rates for a longer time.
According to the CME Fedwatch tool, it is almost certain that the FED maintains interest rates at its current levels in March and May monetary policy meetings. However, there is a 50% probability that Fed can reduce interest rates at the June meeting.
On Tuesday, the president of the Fed, Jerome Powell, reiterated on the first day of a two -day testimony in Capitol Hill that the Central Bank has no “hurry to cut interest rates” since the economy is “strong in general in general “, with a lower unemployment rate and inflation above the 2%target. Powell added, “we know that reducing the restriction of politics too fast or too much could hinder progress in inflation.”
This week, investors will also focus on the US Production Price Index (IPP) and retail sales data for January, which will be published on Thursday and Friday, respectively.
What moves the market today: the EUR/USD remains firm despite the fears that the commercial war between the US and the EU will be deepened
- The EUR/USD remains firm since the euro (EUR) continues to surpass its main peers, although the risks of a commercial war between the US and the euro zone have deepened. The president of the European Commission, Ursula von der Leyen, warned Tuesday that 25% tariffs on imports of steel and aluminum in the US by President Donald Trump “will not remain unanswered.” Von der Leyen added that the EU will act to “safeguard their economic interests” and is ready for “proportional countermeasures.”
- President Donald Trump signed executive orders by imposing 25% tariffs on the imports of steel and aluminum in the US without exemptions or exclusions as a way to boost local production. Trump is also willing to impose reciprocal tariffs on nations with which he sees unfair commercial practices.
- Market participants hope that the euro zone in front of a significant pressure for reciprocal tariffs. The 27 nations block charges 10% tariffs on US car imports and pays an import tariff of 2.5% for national cars that supply them.
- In the front of the monetary policy, the operators are confident that the European Central Bank (ECB) will announce three more cuts of interest rates this year amid the risks that inflation does not reach the objective of 2% of the Central Bank. The ECB has already reduced its deposit rate at 25 basic points (PBS) at 2.75% at the first policy meeting of the year in January.
- Looking ahead, investors will focus on economic growth forecasts, which will be published by the European Commission (CE) on Thursday.
Technical Analysis: EUR/USD maintains the key support of 1,0300
The EUR/USD rises to about 1,0380 at European negotiation hours on Wednesday. The main currency pair maintains its recovery from the key support of 1,0300. However, the perspective of the main currency pair remains bassist since the 50 -day exponential mobile average (EMA) about 1,0423 continues to be an important barrier for the euro bullies.
The 14-day relative force (RSI) index oscillates in the range of 40.00-60.00, indicating a lateral trend.
Looking down, the minimum of January 13, 1,0177 and the round level support of 1,0100 will act as important support areas for the torque. On the contrary, the psychological resistance of 1,0500 will be the key barrier to the euros of the euro.
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.
