- The EUR/USD wins traction about 1,1500 in the Asian session on Wednesday.
- The Fed is expected to hold the stable rates at the June meeting on Wednesday.
- The ECB’s hard line bets support the euro, but the persistent tensions between Israel and Iran could limit their increase.
The EUR/USD PAR attract some buyers around 1,1500 during Wednesday’s Asian negotiation hours. A series of discouraging economic data from the US weigh on the US dollar. However, the increase in tensions between Israel and Iran could limit the rise in the main torque. The Federal Reserve Decision of the US (FED) will be observed closely later on Wednesday.
The erosion of trust in the US economy amid commercial policies undermines the US dollar (USD) compared to the euro (EUR). The data published by the US Census Office on Tuesday revealed that retail sales in the United States fell 0.9% monthly in May, compared to the 0.1% decrease (reviewed from +0.1%) recorded in April. This figure was weaker than estimates of -0.7%. Meanwhile, the US industrial production decreased 0.2% monthly in May compared to the previous 0.1% (reviewed from 0%), worse than 0.1% expected.
Operators expect the FED to maintain indebtedness costs without changes in their June meeting on Wednesday. The markets are now valuing almost 80% probabilities of a Fed rate cut in September, followed by another in October, according to Reuters.
“In the very short term, a cautious message is probably reiterated, but what will be interesting is how they interpret and navigate the new projection, which we believe will show a lower growth path along with a potentially more persistent inflation,” said the barrel of foreign exchange Rodrigo Catril in National Australia Bank.
The hard line tone of those responsible for the European Central Bank (ECB) supports the common currency. The president of the ECB, Christine Lagarde, said that rates reductions are coming to an end, since the Central Bank is now “in a good position” to deal with the prevailing uncertainties.
Meanwhile, investors will keep an eye on geopolitical risks. Israel is prepared to intensify its attacks against Tehran, while the US is considering expanding its role in the middle of the growing tensions between Israel and Iran. Any escalation sign could boost safe refuge flows, benefiting the US dollar.
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.
