- The EUR/USD is quoted in negative territory about 1,0390 in Friday’s Asian session, losing 0.16% in the day.
- The threat of increasing tariffs drags the euro down against the US dollar.
- Fed officials indicated that interest rates are likely to remain unchanged for a while.
The EUR/USD pair remains under selling pressure about 1,0390 during Friday’s Asian negotiation hours. The euro (EUR) weakens against the US dollar (USD) amid the feeling of risk aversion. The US Personal Consumption Expenditure Index (PCE) will be at the Care Center later on Friday.
The president of the USA, Donald Trump, said late on Thursday that the 25% tariffs on the imports of Canada and Mexico will enter into force on March 4, not on April 2, as he had suggested the day before. Trump also declared that China’s products will be subject to an additional 10%tariff. In addition, this week promised 25% tariffs on the shipments of the European Union. Uncertainty about Trump’s tariffs will probably weigh on shared currency in the short term.
Cleveland’s president of the Fed, Beth Hammack, said Thursday that he hopes that the US Central Bank policy of the US Central Bank will remain unchanged at the moment in the midst of the search for evidence that inflationary pressures are going back to the objective of 2%. Meanwhile, the president of the Fed of Atlanta, Raphael Bostic, said late Wednesday that the Fed should maintain interest rates where they are, at a level that continues to exert the downward pressure on inflation. The cautious posture of the Fed could boost the dollar and act as a wind against for the EUR/USD.
The US PCE inflation data for January will be at the Care Center later on Friday. This report could influence market speculation on the monetary policy perspective of the Federal Reserve (FED). Any softer inflation signal in the US economy could undermine USD and help limit torque losses. Financial markets are currently valuing in almost 68% the chances of the FED cutting their interest rate in the June policy meeting after keeping them at the meetings of March and May, according to the Fedwatch tool of the CME.
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.
