- The EUR/USD softens around 1,1325 in the first part of the Asian session on Thursday.
- The US economy contracted 0.3% in the first quarter, weaker than expected.
- The inflation data of the largest nations of the Eurozone support the expectations of the market that the ECB could continue cutting rates.
The EUR/USD pair operates with slight losses about 1,1325 during the first part of the Asian session on Thursday, pressed by the renewed demand of the US dollar (USD). The American dollar index (DXY) advanced even more and reached two days around 99.70. Later on Thursday, the report of the purchasing managers index (PMI) of the US ISM manufacturing will be at the Center for Care. Most markets will be closed on May 1 due to the Labor Day holiday.
The operators withdrew slightly from the bets that the US Federal Reserve (Fed) will reduce their interest rates at a complete percentage point this year after the data showed that the US economy contracted 0.3% annualized the last quarter. Even so, futures contracts see the Fed starting features in June, with a total of four expected quarter reductions, taking the rate to the range of 3.25% -3.50% by the end of the year.
The data published by the US Department of Commerce on Thursday showed that the US economy contracted an annualized rate of 0.3% in the first quarter (Q1) of 2025. This figure was weaker than the growth of 0.4% expected and fell from the previous reading of an expansion of 2.4%.
The report came before the next uncertain steps of the commercial policy of US President Donald Trump. On Wednesday, Trump said the US economy “will take time” to show the result of current policies and blamed the performance of the stock market to former US president Joe Biden.
The initial weekly applications of US unemployment will be published later on Thursday, followed by the final manufacturing PMI of the Global S&P and the ISM manufacturing PMI. All eyes will be placed in the US Non -Agricultural Payroll (NFP) report on Friday, which is expected to show the addition of 130,000 jobs in the US economy in April. In case of a weaker result of what was expected, this could drag the dollar down and create a favorable wind for the EUR/USD.
On the other side of the ocean, the operators have almost discounted a rate cut of 25 basic points (PBS) by the European Central Bank (ECB) at the June policy meeting. ECB officials have predicted greater slowdown in inflation and economic growth in response to tariffs imposed by the US to their commercial partners.
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.
